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  • Bank shares have had an awful week so far.

  • Here are a few of the worst performers.

  • First up is Commerzbank.

  • It's shares hit a record low on Tuesday after it posted its interim results.

  • They showed its core equity tier 1 capital ratio was 11.5% at the end of June.

  • Higher than last year, but down from 12% in March.

  • The bank also captured the broader issue of low interest rates,

  • which are crippling European lenders.

  • In its report, they warned of the interest rate environments,

  • and customer caution in view of the geopolitical uncertainties.

  • It expects net profit will be lower than for the previous year.

  • Next up is UniCredit.

  • Italy's only systemically important bank,

  • which has had a punishing start of the week.

  • It fell by more than 9% on Monday,

  • and its shares were suspended after losing a further 5% earlier on Tuesday morning.

  • The falls come after details of a rescue plan for Monte Dei Paschi,

  • which emerged on Friday.

  • The plan involves that bank taking a hit to the value of its non performing loans as part of their sale.

  • Investors this week have considered the impact of similar hits on the MPLs of other banks including UniCredit.

  • Then we've got Barclays.

  • Its shares fell 2.9% on Tuesday.

  • The bank, along with its UK peers was particularly badly hit as a result of the Brexit vote.

  • It's also like everyone else, exposed to pressures from low interest rates.

  • Today, the shares were further hit by news that the FCA has extended the PPI deadlines to 2019.

  • Finally, we have Credit Suisse.

  • Its shares fell 5.3% on Tuesday morning,

  • and they've lost half of their value so far this year.

  • In a sign of the times, Credit Suisse, along with Deutsche Bank,

  • will next week be dropped from an index of Europe's top 50 companies.

  • This week's losses come after stress test results on Friday,

  • which actually showed a more resilient European banking sector.

  • The key point here is to distinguish between profitability and solvency.

  • European banks don't look profitable at all.

  • So their share prices have collapsed.

  • This doesn't necessarily imply that the solvency of the entire European sector is under threat,

  • as it was during previous crises.

  • But it may be exposed in certain cases such as Italy.

  • The question now, is whether low profitability will eventually seep into the broader stability of the banking sector.

Bank shares have had an awful week so far.

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Awful week for European bank shares | FT Markets

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    Colleen Jao posted on 2016/08/05
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