Global banks shed $459 billion in market meltdown as Goldman Sachs loses on interest rates

Investors wiped nearly half a trillion dollars off the value of bank stocks worldwide in the worst blow to the financial sector since the outbreak of the Covid-19 pandemic.

Financial stocks tumbled this week as fallout from the collapse of Silicon Valley Bank rippled through global markets. U.S., European and Japanese banks lost a combined $459 billion in market value this month — a 16 percent drop, the biggest decline since March 2020.

The biggest loss was in the United States, where the KBW Bank index lost 18 percent in March. The European Stoxx 600 banking index fell 15 percent, while the Japanese Topix banking sector index fell 9 percent.

Efforts to stabilize the financial system and deal with the wider panic have only partially succeeded. Shares of troubled First Republic Bank of California fell by more than a quarter in afternoon trading Friday, despite an injection of $30 billion in cash by Wall Street banks including JPMorgan Chase and Goldman Sachs.

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Shares in Credit Suisse fell 8 percent even after the Swiss central bank offered a 50 billion Swiss franc ($54 billion) emergency credit line on Thursday. The Zurich-based lender’s credit default swaps and bonds were trading at difficult levels.

Volatile markets have hurt even the banks considered stronger, with some seeing the two-year Treasury yield fall at the fastest rate since 1987. Goldman lost about $200 million on its fixed-income trading desk, according to people familiar with the matter. Goldman declined to comment.

Global regulators held talks on Friday night to discuss how to calm fears about the health of the financial system, with some focusing on options to stabilize Credit Suisse and its international subsidiaries.

Executives and board members of the Swiss lender are also debating the future of the 167-year-old bank, which has been reeling from one crisis to another for years.

“It’s clear that we need to review the strategic plan,” said one person involved in the emergency talks. “It’s been crazy for a week. We will look into everything that can be done. Nothing is taboo. But whatever happens, the bank will survive.”

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Another senior official at the lender said they “need to think about different contingency options”. “We have a good strategy, but now the question is whether market conditions and investor support will allow time to work.”

Options under consideration include splitting up the bank and raising funds through a public offering of the ring-fenced Swiss division, in addition to selling the wealth and asset management units, the two people said. This would most likely be a rival to UBS because the government and regulators want them to remain under Swiss control.

Adding to the pressure on management, one of the bank’s largest shareholders is now publicly calling for the domestic unit to be split up to protect depositors, mortgages and small businesses.

“Drastic steps are needed. A complete spin-off of the Swiss branch is required. We have to isolate this now, because the infection is spreading,” said Vincent Kaufmann, CEO of the Ethos Foundation, which represents Swiss pension funds and institutions that own up to 5 percent of the shares.

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According to analysts’ estimates, Credit Suisse’s surrounded domestic bank is twice the group’s total market capitalization.

“The SNB [Swiss National Bank] you have to step in,” Kaufmann added. “I’ve had calls from Swiss pension funds who are very concerned about their exposure and are reducing it.”

Other proposals to be considered this weekend include accelerating the investment bank’s downsizing or even shutting it down altogether, the people added.

Video: Credit Suisse: what’s next for the crisis-stricken bank? | FT film