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Crisis fears over big bank trio
27.10.08
Fears that the financial crisis is set to engulf the Far East and other emerging markets today saw three of Europe's largest banks, which have so far weathered the credit crunch, come under renewed pressure.
Shares in HSBC and Standard Chartered hit five-year lows while Banco Santander, owner of Halifax and Alliance & Leicester but also a major bank in Latin America, was one of the sharpest fallers on European bourses.
HSBC shares fell 50p to 646p and Standard Chartered were 37p lower at 721p while in Madrid Santander fell 9% at one stage before recovering slightly to be 4% lower. For HSBC and Standard, this was the second consecutive day of plunging prices after they fell 13.5% and 15.8% respectively on Friday.
Plunging Far East share prices today had a direct effect on HSBC and Standard Chartered, which until recently had been viewed as a safe haven away from the crisis affecting North America and Western Europe.
But analysts are now questioning whether the two can remain immune to the crunch, and whether even the biggest banks have enough capital to survive a prolonged recession.
Investment bank Citi today said it estimates that Standard Chartered needs to raise about $5 billion (£3.2 billion) of new capital to restore its capital ratios to the same level as those of HSBC. But even then at a core tier one ratio of 7.6%, that would be well below the average Asian bank ratio of 10.5%.
Citi slashed its price target for the bank from 1300p to just 750p, with analyst Tom Rayner saying: "We continue to view the group's capital position as too weak, and earnings estimates are vulnerable to further downgrades."
Standard Chartered and Santander are due to report third-quarter figures tomorrow. They are likely to report strong numbers for the last three months, but investors are wary about their comments on the coming months.
Santander's Abbey is selling its UK train leasing business Porterbrook for up to £2 billion while HSBC could follow suit with HSBC Rail.
Reader views (2)
Banco Santander is not the owner of Halifax
- John, London
When manufactuers face a downturn they put workers on short time and reduce wages. To stabilize world economies the solution is to suspend all stock markets and put traders on a three day week at lower salaries. Much of the volatility is down to unregulated speculative hedge funds who are panic selling to redeem their investments.These funds serve no economic purpose and together with leveraged derivative instruments should be banned by Governments having caused so much damage to millions of people.
We still need to learn the truth about the liabilities of credit default swaps which are still out there like a calm sea before the tsunami hits.
Unfortunately the Mandelson/Osborne saga shows how politics and big business mix in an incestuous relationship and the bail outs to banks appear to be aimed at protecting powerful friends rather than the ordinary taxpaying public who face footing the bill for the bankers greed
- Peterfieldman, paris france
