Banks fall again as bailouts fail to restore calm

Bank stocks plummeted on both sides of the Atlantic as efforts to strengthen the financial system failed to calm investors’ nerves.

After a brutal week in markets around the world, troubled lenders in the US and Europe were once again on the rampage – despite bailouts from Zurich-based Credit Suisse and San Francisco-based First Republic.

The latest sell-off came just a day after First Republic was awarded a £25bn lifeline in a desperate bid to boost confidence.

That bailout package itself came just hours after Credit Suisse’s £45 billion bailout.

But it did little to soothe markets left behind by the rapid collapse of three U.S. regional banks: Silvergate on March 8, Silicon Valley Bank (SVB) on March 10, and Signature Bank two days after.

With investors fearing worse to come, First Republic crashed another 32.8 percent in early trading. Other regional lenders feeling the heat included Pacific West, which lost 7.2 percent, Western Alliance, which lost 15.1 percent, Zions Bancorporation, which lost 3.9 percent, and Comerica, which fell 5.2 percent. In Europe, Credit Suisse plummeted by 10.9 percent.

The fallout was felt in stock markets around the world, with the FTSE 100 giving up early gains to close 1 percent, or 74.63 points, to 7335.4.

Neil Wilson, a strategist at Markets.com, warned of “fear and disgust in banking and markets,” adding, “We’re not out of the woods yet.”

It sets the stage for a rocky weekend for heads of industry, regulators, central bankers and ministers and officials before markets reopen on Monday morning.

The selloff came despite a group of America’s largest banks meeting late Thursday evening to pump £25 billion into First Republic.

There are now serious questions about what can be done to halt the crisis engulfing the banking sector as confidence continues to be eroded.

Investors heavily criticized the decision to pump aid into First Republic, saying it was a mistake to expose the nation’s largest lenders to such a risky asset. Bill Ackman, of hedge fund management firm Pershing Square, said in a tweet that it had created “a false sense of confidence” in the lender and spread financial contagion.

It raises more questions than it answers – it’s bad policy. “I’ve said before that hours matter. We let days pass. Half measures don’t work when there is a crisis of confidence.’

The European Central Bank called an unscheduled meeting yesterday to discuss how to stop contagion and the state of banking in the eurozone.

The Bank of England said it was monitoring the situation and was “engaged” with banks and regulators at all times.

But there was little rest for Credit Suisse when the bank, founded in 1856, was hit by legal action from a group of investors who claimed it had overstated its prospects before this week’s crash.

The Swiss authorities are exploring a possible partnership with UBS to support Credit Suisse, but it is clear that this idea is being reverted. UBS wants to focus on its own asset management strategy and is reluctant to take risks associated with Credit Suisse, sources say.

Analysts think a break-up of Credit Suisse is still the most likely solution.

Last week, Credit Suisse admitted it had “material deficiencies” in its reporting and auditing procedures when it released its delayed 2022 annual report.

Stuart Cole, chief macroeconomist at liquidity provider Equiti Capital, said: “We are far from out of the woods.” Craig Erlam, analyst at Oanda, said: “We need to get through the weekend without more drama.”