Bank Stocks Slide
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The share prices of UBS and Credit Suisse tumbled in line with their European counterparts. Investors fear the coronavirus will spark a wider recession – and banks will bear the brunt.
Credit Suisse shed more than 13 percent in early trading on Monday, losing more than the wider European banking index, which slid 12 percent. Meanwhile, UBS’ stock fell more than 11 percent.
The slides illustrate that investors don’t believe a massive, coordinated plan by central banks overnight will be adequate to stave off recession sparked by the coronavirus pandemic. European banks, which have long procrastinated shaping up following the 2008/09 crisis, are especially vulnerable to this.
Overnight, the U.S. central bank released its big guns with its second cut in two weeks and other policy easing measures. Major U.S. banks including J.P. Morgan said they would suspend share buybacks – a method preferred by banks to return capital to shareholders because it typically boosts stock prices.
Credit Suisse has previously expected to buy back as much as 1 billion Swiss francs ($1.1 billion) in its own stock by year-end, but this is subject to economic conditions that have now changed dramatically. UBS is in the middle of a 2 billion franc, three-year buyback.
Questions & Answers
Q.Why are European banks considered particularly vulnerable to a potential recession?
Why are European banks considered particularly vulnerable to a potential recession?
They have been slow to implement necessary reforms following the 2008/09 financial crisis, making them more susceptible to current economic pressures.
Q.What action did major U.S. Banks take in response to the economic climate?
What action did major U.S. Banks take in response to the economic climate?
Major U.S. Banks, such as J.P. Morgan, announced they would suspend share buybacks, which are a common method for returning capital to shareholders.
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