November 1, 2011 11:52 am

European banks tumble over Greece fears

Shares in European banks plunged on Tuesday after George Papandreou, Greece’s prime minister, unexpectedly called a referendum on Greece’s bail-out.

The FTSE Eurofirst 300 fell 3.4 per cent to 961.76, amid market uncertainty over the effect the proposed referendum would have on last week’s European Union summit deal.

“It is becoming clear that [the] EU summit was not the final solution necessary and instead was more can kicking,” said Kathleen Brooks, research director at Forex.com. This sentiment was echoed across Europe, as prices fell back to levels seen before the latest eurozone deal.

Société Générale led the fallers, tumbling 16.2 per cent to €17.68, wiping out last week’s gains. Crédit Agricole fell sharply, by 12.5 per cent to €4.97, along with Natixis, which closed down 10.1 per cent at €2.08. BNP Paribas plunged 13.1 per cent to €28.56 as the CAC 40 index retreated 5.4 per cent to 3,068.33. Dutch lender ING was also one of the day’s biggest fallers, dropping 14.4 per cent to €5.36.

The Xetra Dax index dropped 5 per cent to 5,834.51 with German banks leading the way down. Deutsche Bank fell 8 per cent to €27.93, compounding Monday’s losses, while Commerzbank also dropped 9.4 per cent to €1.62.

Italian banks fell sharply as the spread between Italian and German 10-year government bonds reached record highs of 455 bps during trading. UniCredit dropped 12.4 per cent to €0.74, while Intesa Sanpaolo dropped 15.8 per cent to €1.09. BMPS fell 10.2 per cent, closing at €0.30. The FTSE MIB index closed 6.8 per cent down, at 14,928.24, with Fiat the largest non-financial faller, closing down 9.5 per cent at €4.02. The Spanish Ibex 35 index closed down 4.2 per cent, at 8,579.6.

UBS fared better than its European peers, dropping 4.9 per cent to SFr10.66. Credit Suisse fell 8.2 per cent to SFr23.50 after the Swiss bank’s chief financial officer said the bank’s third-quarter results released on Tuesday were “below our expectations”.

The Athens General index dropped 6.9 per cent to 752.65, following Mr Papandreou’s announcement. Piraeus Bank fell 5.2 per cent to €0.20, while National Bank of Greece dived 14.5 per cent to €1.47, its lowest price since 1992.

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