Deutsche Bank, UBS hit as bank fears spark stress signals in markets

European banking stocks fell sharply on Friday, with Deutsche Bank and UBS knocked by worries that actions by regulators and central banks have not yet contained the worst problems to face the sector since the 2008 global financial crisis. Financial market stress indicators were also again flashing warning signs more widely, with the euro falling against the dollar and bond yields sinking.

Deutsche Bank shares fell for a third day, dropping more than 12 per cent after a sharp jump in the cost of insuring its bonds against the risk of default.

Shares in Germany’s largest bank have lost a fifth of their value so far this month and the cost of its 5-year credit default swaps (CDS) — a form of insurance for bondholders — jumped to a four-year high on Friday, based on data from S&P Market Intelligence.

The pain was spread across the sector, with the index of top European banks falling 5.1 per cent and British banks losing 4 per cent, down for a third straight session.

EU leaders show of faith

European Union leaders and the ECB sought to calm market jitters by presenting a united front on the banking sector on Friday, saying EU lenders are well capitalised and liquid. “Our banking sector is resilient, with strong capital and liquidity positions,” the leaders of the 27 EU countries said.

UBS offers sweeteners to Credit Suisse Asia wealth bankers in a bid to retain talent

UBS has promised retention packages to wealth management staff in Asia at Credit Suisse, two sources said, as the Swiss bank tries to stem a talent exodus after the takeover of its former rival.

Credit Suisse, UBS in DoJ Russia-sanctions probe

Credit Suisse and UBS group are under scrutiny in a US Department of Justice (DOJ) probe into whether financial professionals helped Russian oligarchs evade sanctions. The DOJ also sent subpoenas to employees of some major US banks, the Swiss banks were included in a wave of subpoenas sent before Credit Suisse's takeover by UBS.

US markets open lower amid crisis

Stocks are falling as more worries about banks tug markets lower. The S&P 500 fell 0.6 per cent early on Friday. The Dow and the Nasdaq also fell.  Futures for the Dow Jones Industrial Average slid 1 per cent and the benchmark S&P 500 fell 0.8 per cent. US bank stocks fell between 2  and 4 per cent.

Meanwhile, S&P Global said its flash US Composite PMI Output Index, which tracks the manufacturing and services sectors, increased to 53.3 this month, highest since last May and followed a final reading of 50.1 in February. - Agencies