Banks in fo­cus as world stocks drift into break

Kuwait Times - - BUSINESS -

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

SURABAYA, In­done­sia: This pic­ture taken on Thurs­day shows an In­done­sian woman car­ry­ing bags of gar­lic at a mar­ket. — AFP

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