More than £12.8 billion was wiped off the value of UK bank shares on Friday after warnings over bad loans at US regional banks rattled investors worldwide.
Shares in Barclays and Standard Chartered plunged as much as 6.8% and 5.4%, respectively, amid growing doubts about the stability of smaller American lenders. The FTSE 100, which is heavily weighted towards financial stocks, slumped by as much as 1.7% in London.
HSBC, the second-largest company on the index, fell 2.5%, alongside similar declines at Lloyds Banking Group and NatWest. The broad-based sell-off came as investors fled financials on fears of hidden stress across the $4.5 trillion in loans US banks have extended to non-bank financial institutions.
Global markets were hit hard overnight. Japan’s Nikkei 225 dropped 1.5%, Hong Kong’s Hang Seng fell 2.5%, Germany’s DAX lost 2.4%, and France’s CAC 40 slid 1.3%, following a sharp sell-off on Wall Street.
Concerns intensified after the bankruptcies of US auto lender Tricolor and auto parts maker First Brands, which reignited fears about the $3 trillion private credit market. Top financial leaders, including IMF chief Kristalina Georgieva, warned that risks in the so-called shadow banking sector “keep [her] awake at night,” while JP Morgan’s Jamie Dimon cautioned that “when you see one cockroach, there’s probably more.”
The immediate trigger came from US lenders Zions Bancorporation and Western Alliance Bancorp, which disclosed loan losses of $50 million and $100 million, respectively. Shares in both banks plunged — Zions down 13% and Western Alliance off nearly 11% — dragging the SPDR S&P Regional Banking ETF more than 6% lower.
