Global banks lose $500 billion in market losses as Goldman Sachs loses on rate swings

Investors wiped out nearly half a trillion dollars from the value of banking stocks around the world in the financial industry’s worst defeat since the start of the Covid-19 pandemic.

Financial stocks fell this week as the fallout from the Silicon Valley Bank collapse spread across global markets. Banks in the US, Europe and Japan have collectively lost $459 billion in market capitalization so far this month – the 16 percent drop is the sharpest slump since March 2020.

The biggest losses came in the US, where the KBW Bank index lost 18 percent in March. Europe’s Stoxx 600 banking index is down 15 percent, while Japan’s Topix banking sector index is down 9 percent.

Attempts to stabilize the financial system and prevent wider panic have been only partially successful. Shares of troubled California bank First Republic fell more than a quarter during afternoon trading on Friday despite a $30 billion cash injection from Wall Street banks including JPMorgan Chase and Goldman Sachs.

Shares of Credit Suisse fell 8 percent even after the provision of a SFr 50 billion ($54 billion) emergency loan from the Swiss central bank on Thursday. The Zurich-based lender’s credit default swaps and bonds traded at distressed levels.

The volatile markets have hurt even banks that are considered stronger, with some hit by the fall in two-year Treasury yields at the fastest pace since 1987. Goldman lost about $200 million to its trading desk that trades interest rate products, according to people familiar with the case. Goldman declined to comment.

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

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

“Clearly we need to review the strategic plan,” said one person involved in emergency consultations. “It’s been a week of madness. We’re looking at everything possible. There’s nothing taboo. But whatever happens, the bank will survive.”

Another senior figure at the lender said they should “think about the various contingency options we have”. “We have a good strategy, but the question now is whether market conditions and investor support will give it time to work.”

Options under consideration include breaking up the bank and raising funds through a public offering of the segregated Swiss division, selling its wealth and asset management units, the two people said. This would most likely rival UBS as the government and regulators would rather they remain under Swiss control.

One of the bank’s largest shareholders is pressuring management and is now publicly calling for a separation of the domestic division to protect depositors, mortgages and small businesses.

“Drastic measures are needed. There must be a full spin-off from the Swiss branch. We have to isolate that now because the contagion is spreading,” said Vincent Kaufmann, CEO of the Ethos Foundation, which represents Swiss pension funds and institutions that hold up to 5 percent of the shares.

Analysts estimate that Credit Suisse’s foreclosed domestic bank is worth as much as double the group’s total market capitalization.

“The SNB [Swiss National Bank] must intervene,” Kaufmann added. “I received a few calls from Swiss pension funds who were very concerned about their exposure and they have reduced it.”

Other proposals under investigation this weekend include speeding up cuts at the investment bank, or even shutting it down, the people added.

Video: Credit Suisse: what next for the bank hit by the crisis? | FT movie

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