Financial analysis

Europe’s banking stocks recover as SVB deal brings respite

European banking stocks rose Monday, boosted by the news that US lender First Citizens Bank would buy most of the business of failed Silicon Valley Bank.

The Stoxx Europe 600 Banks index, which tracks 42 big EU and UK banks, ticked up by nearly 1% in morning trade, while London’s bank-heavy FTSE 100 (UKX) was 0.5% higher.

Deutsche Bank (DB) rose 6% in early trade, before paring gains to trade 4% higher by mid-morning. Its stock closed down 8.5% on Friday as investors fretted that Germany’s biggest lender might be vulnerable to the crisis of confidence triggered by the collapse of SVB, and the emergency rescue of Credit Suisse (CS).

Shares in HSBC (FTRXX) were up 0.13%, Barclays (ATMP) 2.1% and Commerzbank (CRZBF) 3.2%.

But the stock of Switzerland’s biggest bank, UBS (UBS), fell 0.55%, following a 3.5% decline last Friday. UBS (UBS) agreed a week ago to buy Credit Suisse (AMJL) in a 3 billion Swiss franc ($3.25 billion) deal brokered by the Swiss government to prevent a wider crisis in the financial sector.

Anxiety over the stability of banks has whipped through global markets since SVB collapsed on March 10 and US regional lender Signature Bank followed two days later.

Susannah Streeter, head of money and markets at investing platform Hargreaves Lansdown, said in a note Monday that SVB’s buyout “has brought some respite to the beleaguered banking sector.”

The Federal Deposit Insurance Corporation (FDIC) announced late Sunday that First Citizens (FCIZP) Bank would buy SVB’s deposits and loans that regulators had transferred to a bridge bank after its demise. The FDIC said First Citizens (FCIZP) was getting the $72 billion in SVB loans at a discount of $16.5 billion.

Banking stocks in Asia were less buoyant Monday. In Hong Kong, Standard Chartered (SCBFF) closed 0.4% down. In South Korea, major lender Shinhan Financial Group (SHG) closed 0.87% lower.