Shares in European banks fall for a third consecutive day, putting the brakes on the sector's rally in recent months. The Stoxx 600 banks index has shed 18% since Thursday's opening bell as the Trump administration sweeping tariffs sparked fears of trade wars that could trigger a global recession, and hit the European economy, for which banks tend to act as a proxy. The index was down around 5% in European midday trading with Intesa Sanpaolo, Barclays, Santander, BBVA, Societe Generale and Deutsche Bank among the biggest fallers.

Profit-Taking on Rate-Geared European Bank Stocks Is Understandable

0931 GMT - Taking profits on the European banking stocks most exposed to rate cuts makes sense in the near term given their substantial outperformance since the start of the year, UBS says in a research note. Lenders in Spain, Italy, Ireland, Portugal and the Nordics are most exposed to moves in interest rates. "While the curve implies that the ECB will be hiking rates modestly in the next 18-24 months as fiscal spend comes online... there's currently too little confidence amongst investors as to where the near-term floor for rates is to expect easy and early buying of the more rate-geared names," analysts write. The Stoxx 600 banks index, which is seeing a third day of losses, is down 5.9% amid the market selloff triggered by U.S. tariffs. (elena.vardon@wsj.com)

Bar Is High for European Banks' Asset-Quality Deterioration

0909 GMT - There is a high bar for a broad-based deterioration of European banks' asset quality due to the consequences of U.S. tariffs on companies and consumers, Morgan Stanley says in a research note. This comes after the Trump administration outlined a 20% blanket levy for the EU. "There could be upside to provisions in the more affected regions or sectors; however, we believe the overall asset quality picture remains robust," analysts write. The manufacturing sector represents only 6% of loan books, and unemployment would need to rise significantly for provisions to increase beyond estimates, they say. Near-term earnings are likely to be weighed down by renewed uncertainty on interest-rate moves, which could hit lenders' net interest income, they add. The Stoxx 600 banks index extends losses and sheds 5.7%. (elena.vardon@wsj.com)

Tariffs Turmoil Keeps Weighing on European Bank Stocks

0727 GMT - Shares in European banks took another beating at market open on Monday as fears from the ripple effects of U.S. tariffs on the global economy extended last week's heavy declines. The Stoxx 600 banks index fell 5.4% in opening trade in Europe, piling on to Thursday and Friday's losses. Since the start of the month, the index has shed 17% and has almost wiped out its year to date gains. "Knock on effects of tariffs are potential meaningful earnings headwinds to banks," RBC Capital Markets says in a research note. The fortunes of European banks have turned in a short amount of time as the economic outlook has drastically changed, analysts write. The wider cross-industry Stoxx 600 index is down 6.1% and has shed 8.1% year to date. (elena.vardon@wsj.com)

Hit to U.K. Banks From Tariffs Wasn't as Bad as Brexit

0701 GMT - The hit to U.K. banking shares from U.S. tariffs looks harsh but wasn't as damaging as the results of the Brexit referendum in 2016, Keefe, Bruyette & Woods say in a research note. U.K. banks lost 12% last week while stocks were down 18% after the Brexit vote and continued to outperform for a further week recovered the lost ground over four months, analysts Edward Firth and Elise Yu Ge write. While it is hard to find examples that are comparable, there are similarities with Brexit and the erection of trade barriers with the EU, they say. "We remain positive [on] U.K. domestic banks, where the recent selloff and current valuations suggest a dire outcome in a remarkably benign banking environment," they note. (elena.vardon@wsj.com)

Banking Sector Could Benefit From Supply-Chain Reorganisation

0642 GMT - The banking sector is set to benefit from the opportunity created by U.S. tariffs that will lead to the long-term reorganization of supply chains of large corporates and small-and-medium enterprise exporters, JP Morgan says in a research note. Companies will call on banks for services such as payments, lending facilities and custody, analysts write. "Corporate expansion in the U.S. (i.e. near-shoring) will be an ongoing theme and Banks with [investment banking]/corporate counterparty expertise in this new tariff world will be well positioned," they note. However, the industry will first have to face the negative effects of slower global growth and its consequences on the setting of interest rates, on asset quality and loss provisions, they add. (elena.vardon@wsj.com)

European Bank Shares to Remain Volatile

0634 GMT - European banking stocks are now reflecting the market complacency around trade and geopolitical tensions, J.P.Morgan says in a research note after the Stoxx 600 banks index took a 14% hit late last week after U.S. tariff tensions escalated. This represents a hit to earnings per share between 10% and 15% as the market prices in a short-term shallow recession, the analysts write. The selloff didn't come as a surprise to JPM analysts, who stay positive on the sector in the long term. "Going forward, we expect ongoing volatility in share prices as the market digests measures (and counter-measures) on tariffs ... this is likely exacerbated by the fact that the sector has more recently drawn interest from a wider range of new investors (including Macro funds and new international investor base)," they write. (elena.vardon@wsj.com)

(END) Dow Jones Newswires

April 07, 2025 06:40 ET (10:40 GMT)

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