MORE than £30 billion has been swiped from the value of Britain’s top banks since last week as investors fret over how severe the latest financial crisis could become.
The biggest chunk is from HSBC, the UK’s largest bank and a player on the global stage, figures from Scope show.
In the wake of the UBS takeover of Credit Suisse rushed through last night, UK bank shares kept on falling today, suggesting investors have not been sufficiently reassured that the contagion won’t grow.
Since the start of last week, HSBC shares are down by £13 billion, with Standard Chartered off £4 billion, Barclays off the same and Lloyds and NatWest down £3 billion each. Today Barclays fell 7p to 133p, HSBC lost 17p to 525p and NatWest fell 6p to 252p. Across Europe, bank shares tumbled.
James Hughes of Scope Markets said: “The banking sector continues to chart a chaotic course with the weekend’s buyout of Credit Suisse doing little to calm investor nerves. Hopes are really now resting on the Federal Reserve to be throwing the markets something of a bone on Wednesday, placating investor fears along the way, but the underlying theme feels like there’s still more bad news to come.”
The Swiss government scrambled to seal the Credit Suisse deal before the start of trade to take the 160-year-old former titan of finance under the ownership of its arch rival UBS.
Already reeling from a series of scandals, Credit Suisse was seen as badly exposed to the danger of a sharp decline in government bonds, assets banks often sell to meet ongoing financing needs. Rising interest rates at central banks capped demand for the bonds, leaving lenders with big markdowns in the value of their holdings and significantly weaker balance sheets.
Central banks announced on Sunday that there would be co-ordinated action to make sure big-name lenders throughout the system could keep access to dollars to keep transactions between banks running smoothly.
At times of crisis, a dash to the safety of the world’s reserve currency can leave it in short supply. To avoid the knock-on effects this can cause, seven central banks, including the Bank of England, the US Federal Reserve and the European Central Bank, set up dollar swap lines to ease fears of a systemic crisis.
Gold, another classic haven asset, topped $2,000 an ounce for the first in over a year, before easing back. UBS’s stock was down over 9% to SFr15.505 (£13.24), its lowest since October. Credit Suisse’s stock was at SFr0.7264, slumping by 60%. At the start of the month, Credit Suisse was at SFr 2.80.
The turmoil in the financial system stoked doubts over the he extent to which central banks will keep on raising interest rates, in a fight against inflation intensified by Vladimir Putin’s invasion of Ukraine, which sent energy costs soaring.
Over 50% of investors now expect the Bank of England to swerve a further interest rate rise when members of its Monetary Policy Committee meet on Thursday, according to a Refinitiv poll – a huge jump from the roughly 10% who shared that view at the beginning of the month. Over 60% expect the US Federal Reserve to keep rates flat too.
Russ Mould of AJ Bell said: “The banking crisis we’ve seen over the past few weeks has started a new chapter rather than reaching its ending. So far March has been like a ghost train for investors. Every time they turn a different corner, some new horror screams in their face. Many now want to get off the train.”
The intervention in the Alps came just days after an agreed backstop from the Swiss Central Bank failed to stop Credit Suisse’s shares from plunging.
