Wrapup 1: Global banking stocks skid after Moody's cuts, Italy windfall tax
08/08/2023 13:25
By Niket Nishant
Aug 8 (Reuters) - Shares of global lenders fell on
Tuesday as investors turned nervous following a Moody's
downgrade of 10 mid-sized U.S. banks and Italy approving a
surprise 40% windfall tax on lenders.
The rating agency said rising funding costs, a possible
decline in deposit levels and weaker profitability pose risks to
the U.S. banking sector, which went through a crisis earlier
this year after the collapse of three lenders.
"The Moody's announcement is a wake-up call," said Stuart
Cole, chief macro economist at Equiti Capital.
"It is significant for U.S. growth too, as U.S. regional
banks are the financing lifeblood for small and mid-size
enterprises."
Moody's also placed four banking giants, including Bank of
New York Mellon BK.N , US Bancorp USB.N , State Street STT.N
and Truist Financial TFC.N on review for potential downgrades.
Shares of Bank of New York Mellon and U.S. Bancorp fell more
than 2%, while Truist Financial TFC.N and State Street STT.N
dropped over 1%. Truist declined to comment, while the other
three did not immediately respond to Reuters requests for
comment.
Shares of Bank of America BAC.N , Citigroup C.N and
JPMorgan Chase JPM.N fell more than 1%. Their ratings were not
part of Moody's review.
Separately, most European lenders fell sharply after Italy
approved a one-off 40% tax on profits banks reap from higher
interest rates.
Italy will tax 40% of the net interest margin (NIM) earned
in 2022 or 2023 - depending on which sum is bigger - and above
given thresholds for a yearly increase.
Major Italian banks including Intesa Sanpaolo ISP.MI ,
Banco BPM BAMI.MI and UniCredit CRDI.MI fell between 7.2%
and 8.4%.
U.S. DEPOSIT STRESS
In their earnings reports last month, several big U.S. banks
reported a jump in profits boosted by higher rates, but also
warned of risks with U.S. consumers spending less and loan
growth expected to slow.
Deposits, which have been a pressure point for banks since
Silicon Valley Bank failed earlier this year, is also expected
to decline further as high rates prompt customers to look for
alternatives that provide higher yields.
"Although the general drain on deposit funding caused by
quantitative tightening (QT) moderated in Q2, there remains a
significant risk that systemwide deposits will resume their
decline in coming quarters," Moody's wrote in its note dated
Monday.
Still, some analysts remained positive about the sector.
"The overnight news doesn't really dent our view on U.S.
banks because we have been favoring quality and liquidity as a
whole, our view on the broader sector still remains
constructive," said Georgios Leontaris, chief investment officer
for Switzerland and EMEA at HSBC Global Private Banking and
Wealth.
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Banks lag Wall Steet after banking turmoil https://tmsnrt.rs/3DO5KGE
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(Reporting by Niket Nishant, Bansari Mayur Kamdar and Shashwat
Chauhan in Bengaluru and Lananh Nguyen in New York; Editing by
Shounak Dasgupta and Saumyadeb Chakrabarty)
((Niket.Nishant@thomsonreuters.com))