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| European Bank Stocks Slide as Credit Suisse Plunges and Investors Fear Contagion |
Credit Suisse's stock plunge sent shockwaves through the European banking sector today. Shares of several large European-based banks fell after the embattled Swiss lender's shares tanked by as much as 25% in one day. German bank Deutsche Bank saw its shares trading roughly 8.7% lower, while shares of the Spanish lender Banco Bilbao Vizcaya Argentaria traded roughly 10% lower, and shares of the large Dutch bank ING Groep were down about 9.2%.
The global banking sector has been on edge since last week when Silvergate Capital, SVB Financial, and Signature Bank collapsed in a span of just days, facing a run on deposits and having to sell bonds at losses to cover the outflows. Credit Suisse's largest shareholder, the Saudi National Bank, said it wouldn't pledge any additional support through purchases of equity, causing the decline in Credit Suisse's stock and bonds.
Joost Beaumont, head of bank research at ABN Amro, said that the decline in Credit Suisse's stock and bonds means that "investors judge that this bank needs to be rescued." If regulators do not handle the Credit Suisse situation well, this will send shockwaves through the whole sector. Credit Suisse had more than $580 billion of assets at the end of 2022, making its failure the largest ever, and serving a much wider range of clients.
Credit Suisse is in trouble if it can't soon reverse outflows in its wealth division, which is a big part of what makes the bank valuable and a centerpiece of Credit Suisse's transition plan. A failure of Credit Suisse would certainly be a systemic event that would hurt other European banks. However, as stand-alone banks, Deutsche Bank, ING, or BBVA do not have any particular problems. Investors should keep a close eye on Credit Suisse because its failure would hurt many other bank stocks, especially in Europe.
In conclusion, European bank stocks slid today on fears over Credit Suisse, with investors judging that the bank needs to be rescued. While nothing can be ruled out in the current environment, regulators are on high alert. Credit Suisse's failure would hurt many other bank stocks, especially in Europe.
