The world's biggest banks took a stock market beating on Friday as signs of trouble at a US regional lender sparked concerns over the wider sector.
The four biggest US banks lost a whopping $52 billion in market value on Thursday after shares in SVB Financial, a major lender to the tech industry, sank by 60 per cent.
Deutsche Bank was among the biggest losers on Friday as its shares fell by almost 10 per cent after Frankfurt's stock market opened, recovering somewhat later to trade around seven per cent lower.
In London, Barclays, Lloyds and NatWest shed as much as five per cent before paring back some losses.
France's Societe Generale fell more than five per cent while BNP Paribas was down more than three per cent. Switzerland's UBS and Credit Suisse sank by more than four per cent.
Tokyo-listed Mitsubishi UFJ Financial Group gave up more than six per cent while HSBC lost around three per cent in Hong Kong, as did National Australia Bank in Sydney.
SVB Financial spooked the markets after announcing a stock offering and offloading securities to raise much-needed cash as it struggles with falling deposits.
It revealed that it had lost $1.8 billion following the sales, raising concerns that other banks could be facing similar problems.
SVB chief executive Greg Becker sought to reassure customers about the bank's financial health on Thursday, the Wall Street Journal reported, citing people familiar with the matter. The newspaper said Becker urged them not to pull their deposits from the bank and not to spread fear or panic about its situation.
SVB chief executive Greg Becker sought to reassure customers about the bank's financial health on Thursday, the Wall Street Journal reported, citing people familiar with the matter. The newspaper said Becker urged them not to pull their deposits from the bank and not to spread fear or panic about its situation
Investors fear that other banks could face similar losses as their bond portfolios have been hit by rising interest rates, analysts say.
Central banks worldwide have been hiking interest rates in an effort to tame decades-high inflation.
The higher rates have hurt the value of bonds with lower returns that lenders held before central banks launched their rate-hike campaigns last year.
Banks now face losses if they decide to sell those assets to cover the drop in deposits.
"In theory, the rising interest rates would've been a boon for the banking sector as it would top their net interest income, as they would start making money on deposits, yet again," said Swissquote bank analyst Ipek Ozkardeskaya. "But the problem is that the interest rates rose too fast," she said.
'Something always breaks hard'
In another blow, crypto banking giant Silvergate said it planned to close as the sector faces more turmoil.
Stock markets were already on edge this week after US Federal Reserve chief Jerome Powell warned that a quicker pace of hikes might be required to fight inflation.
The Fed is holding its next policy meeting on March 21-22 but markets are eagerly-awaiting the US jobs figure due later on Friday for clues on how US central bankers might act.
Investors fear that the Fed could tip the economy into recession if its rates are too steep and held high for too long.
Shares of the biggest US bank, JPMorgan Chase, ended the day down 5.4 per cent on Thursday.
Bank of America and Wells Fargo both fell 6.2 per cent, while Citigroup was down 4.1 per cent.
"It is not a stretch to say that this episode is emblematic of the higher-for-longer rate regime we appear to be at the start of," Deutsche Bank analysts said in a note. "We'll have to see how this story develops but something always breaks hard during or after a Fed hiking cycle," they said. "Is this another mini wobble on this front or the start of something bigger? Tough to tell, but I would be stunned if there weren't many more casualties of this boom-and-bust cycle."