European Banks Face Financial Crisis

The Stoxx 600 Banks Index, which covers major European bank along with large, mid and small capitalization companies among 17 European countries, fell 3.7% to close at 83, below even the multi-decade low of 87 in March 2009, at the bottom of the first Financial Crisis this century. Today’s close was the lowest since February 1988, during the sell-off that followed Black Monday in October 1987. The index has collapsed by 85% since its peak in May 2007, after having quadrupled over the preceding 12 years. 

The almost vertical collapse of those shares over the past four weeks is but the latest episode in a 13-year story of decline. The Stoxx 600 bank index has slumped by 85% since its peak in May 2007. See below: 

But what is the ECB going to do to rescue bank shareholders? Not much. Why? Because the ECB is primarily concerned with keeping the Eurozone duct-taped together. Unlike the Federal Reserve, whose 12 regional Federal Reserve Banks are owned by the banks in their districts, and to whom bank stocks are therefore hugely important, the ECB couldn’t care less about European bank stocks, as long as the banks themselves don’t collapse. As a result, it has thrown just about everything it has at the problem of keeping the Eurozone intact, including conjuring up €4.7 trillion ($5.2 trillion) of freshly printed money and pushing its policy rates and many bond yields into the negative interest rate territory, with largely undesirable and unsustainable consequences for banks and their stock bank shares.

On top of this scenario comes the impact of the coronavirus. The Stoxx 600 Banks Index has plunged 45% since February 17, going to heck in a (nearly) straight line, and is down by 58% since January 2018. See below:

Below, in descending order, is a list of the worst-hit large publicly traded systemically important banks (G-SIBs) – due to the size, scope, and inter-connectedness of their assets – in Europe. The first percentage is the amount by which the bank’s shares have fallen since February 17, when the Coronavirus began spreading like wildfire through northern Italy, causing everything to go to heck. In parentheses is the amount by which they have fallen since Jan 1, 2018. See Below:

1. Société Générale (France): -56% (-67%)
2. ING (Netherlands): -54% (-73%)
3. Credit Agricole (France): -53% (-57%)
4. Santander (Spain): -52% (-64%)
5. Barclays (UK): -53% (59%)
6. BNP Paribas (France): -52% (-58%)
7. Unicredit (Italy): -51% (-57%)*
8. Deutsche Bank (Germany) -50% (-68%)*
9. Credit Suisse (Switzerland): -49% (-62%)
10. RBS (UK, majority state-owned): -39% (-54%)

* Deutsche Bank has lost more than 95% of its market value since 2007 and Unicredit more than 98%. 

Note: The July 21st, Solar Eclipse will make a direct hit to the Stoxx 600 Bank Index Mercury-Neptune-Sun conjunction First Trade Horoscope.