S&P/ASX 200 Index (ASX: XJO) bank shares are taking a tumble today.
Here's how the big four bank stocks are tracking during lunch hour on Thursday:
- Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares are down 1.72%
- National Australia Bank Ltd (ASX: NAB) shares are down 0.76%
- The Westpac Banking Corp (ASX: WBC) share price is down 1.43%
- And Commonwealth Bank of Australia (ASX: CBA) shares are even after an earlier plunge
Now, it's not just ASX 200 bank shares under pressure today.
The benchmark index is also down 1.41% at the time of writing, with the S&P/ASX 200 Financials Index (ASX: XFJ) dipping 0.75%.
So, what's going on?
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Why are ASX 200 bank shares out of favour today?
Financial shares the world over are catching turbulence as some of their international peers struggle with rapidly rising interest rates following a decade-long era of easy money.
Modest increases in interest rates can improve banks' profitability by increasing their net interest margins.
But rapid rates can see their private and business customers struggle to make loan payments, increasing the level of defaults.
ASX 200 bank shares came under pressure earlier this week in the wake of the collapse of United States-based SVB Financial Group (NASDAQ: SIVB), or Silicon Valley Bank.
As depositors began to fear SVB was facing liquidity issues, the dreaded bank run ensued, and the bank was unable to meet the demand for withdrawals. The government stepped in to assure depositors will be fully covered, but shareholders were left holding the bag.
Shares in the now-defunct bank last traded on 9 March, a day they tanked by a gut-wrenching 60%.
Banking crisis leaps across the pond
In the latest development putting new pressure on ASX 200 bank shares, the contagion from SVB's collapse appears to have spread to Europe.
Investors are now worried about the viability of Credit Suisse Group (SWX: CSGN). Fears were stoked after the Swiss-based bank's largest investor, Saudi National Bank, said regulatory issues prevented it from providing additional funds.
Shares in Credit Suisse plummeted 24% on the SIX Swiss Exchange, hitting new record lows.
Commenting on the development, the head of institutional clients at Banca Ifigest in Milan, Carlo Franchini, said (quoted by Reuters), "Markets are wild. We move from the problems of American banks to those of European banks, first of all Credit Suisse. This is dragging lower the whole banking sector in Europe."
As for what investors in ASX 200 bank shares can expect from the global banking sector over the coming weeks, we'll likely just have to wait and see.
"It's too early to know how widespread the damage is," BlackRock chief executive Laurence Fink said (courtesy of The Australian Financial Review).
"The regulatory response has so far been swift, and decisive actions have helped stave off contagion risks. But markets remain on edge," Fink added.
Indeed!
