S&P/ASX 200 Index (ASX: XJO) bank shares are shrugging off liquidity concerns that have gripped the banking sectors in the United States and Europe in recent weeks.
Following the collapse of several US banks– including Silicon Valley Bank, formerly the 18th largest in the country – investors are taking heart that the US Fed is stepping in to provide a deep pool of liquidity support for the sector.
The Fed joins the European Central Bank, Bank of Japan, Swiss National Bank, Bank of England and the Bank of Canada in a coordinated action intended to calm financial markets.
This comes atop yesterday's announcement that UBS will merge with embattled Credit Suisse in a deal backstopped by the Swiss government.
And judging by the performance of the big four bank stocks, these government-engineered efforts are having some success at soothing market jitters.
Here's how the big four ASX 200 banks shares are tracking in afternoon trade today:
- Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares are up 1.7%
- National Australia Bank Ltd (ASX: NAB) shares are up 1.1%
- Westpac Banking Corp (ASX: WBC) shares are up 2.3%
- Commonwealth Bank of Australia (ASX: CBA) shares are up 1.1%
ASX 200 bank shares aren't the only stocks rallying today.
At the time of writing the benchmark index is up 1.2%, with the S&P/ASX 200 Financials Index (ASX: XFJ) rallying 1.6%.
Is the ASX 200 bank share party premature?
Today's rally in ASX 200 bank shares largely mirrors action seen in US and European markets yesterday (overnight Aussie time).
But not every bank is joining in the rebound.
Shares in First Republic Bank (NYSE: FRC) closed down 47% overnight amid investor concerns the $30 billion rescue package delivered by larger US banks last week might not be enough to keep it viable.
Also of potential concern, opposition is growing to the Swiss government-engineered takeover of Credit Suisse.
With Switzerland's central bank and government backstopping the deal UBS is acquiring Credit Suisse for approximately AU$4.8 billion, paid out to shareholders.
But in contravention of long-standing market rules, the bank's Additional Tier 1 bondholders will receive nothing, which will see almost $26 billion worth of the debt notes become worthless.
Some bondholders are already considering litigation, and Swiss MPs may also review the deal, which was hastily hammered out over the course of the weekend.
Should the deal unravel, ASX 200 bank shares could join their global peers in a fresh round of sell-offs.
But for now, at least, investors are breathing a sigh of relief.
