Banks in focus as world stocks drift into break
LONDON:
Europe’s stock markets and Wall Street were broadly stable yesterday on a quiet last trading day before Christmas, with banks topping the agenda after huge US fines and a bailout in Italy. London closed marginally higher in a half-day session, as upwardlyrevised data showed the British economy grew 0.6 percent in the third quarter despite Brexit jitters. In the eurozone, Frankfurt and Paris hovered around either side of unchanged, but Milan jumped nearly one percent on relief over a state rescue of the Monte dei Paschi di Siena (BMPS) bank.
“It has been a mixed end to the year for European banks with Monte dei Paschi being forced to rely on state aid and Deutsche Bank and Credit Suisse coming to an agreement with US authorities on rather sizeable fines,” Oanda analyst Craig Erlam told AFP. “Still, banks are trading higher on the whole today boosted by the removal of considerable uncertainty in both cases, even if the outcome itself is a concern.”
Deutsche Bank and Credit Suisse have agreed to pay a total of almost $12.5 billion to settle disputes over the sale of mortgage-backed securities during the global financial crisis. Germany’s biggest lender has reached a $7.2-billion deal to settle a case with the DoJ over its role in the subprime mortgage crisis. Credit Suisse meanwhile agreed to pay nearly $5.3 billion. The DoJ said Thursday that it was suing Barclays, accusing the British bank of massive fraud in the sale of mortgage-backed securities which contributed to the 2008 crisis. Barclays rejects the claims and says it will “vigorously defend” itself.
BMPS shares suspended
“It’s a mixed day for banks, after... fines from the US Department of Justice came in lower than feared, and Italy’s Monte dei Paschi di Siena’s shares suspended after the inevitable admission that is does indeed require state aid,” said Russ Mould, investment director at stockbroker AJ Bell. “The US DoJ had initially pressed for a $14 billion fine on Deutsche Bank for alleged mis-selling of mortgage backed-securities at the height of the housing bubble in the middle of the last decade, so the market is seeing the eventual $7.2 billion penalty as a bit of a result for the German lender,” he said. “Shareholders in Credit Suisse are clearly similarly relieved, while it is possible that investors in Barclays are talking the view that any settlement may not be as punitive as feared.”
In Frankfurt, Deutsche Bank shares gained 0.7 percent, while Credit Suisse stood 1.1 percent lower, after slipping from an initial upward bounce of two percent. Back in London, Barclays’ share price sank 0.90 percent. Barclays was one of several major banks implicated in the crisis that so far have not reached settlements with US authorities over their roles in the financial meltdown.
Meanwhile in Italy, the government approved a bailout plan in the early hours of yesterday to rescue the country’s struggling banks, with BMPS likely the first in line. The announcement by Prime Minister Paolo Gentiloni comes after BMPS - the world’s oldest bank said it had failed to raise five billion euros ($5.2 billion) from the markets to shore up its capital. The plan approved at a late-night cabinet meeting taps into the package of up to €20 billion approved by parliament on Wednesday.— AFP