May 9, 2012 1:03 pm

Investor anxiety shifts to Spain

Investors shifted their anxiety from Greece to Spain on Wednesday, with Spanish banks suffering heavy selling amid concerns about the sector.

Bankia , Spain’s third-largest bank by assets, extended Tuesday’s losses, sliding 5.8 per cent to €2.13. Shares fell nearly 5 per cent on Tuesday after news that the government could inject up to €10bn into the bank.

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The capital injection is expected to be part of a larger bank recapitalisation programme to be announced on Friday.

Reports that this programme could require lenders to shore up more than €30bn to insulate against bad property loans sent bank shares plunging.

Domestic retail lenders suffered the biggest losses, as investors fretted over the sector’s combined €340bn exposure to the property market.

Caixabank , Spain’s biggest domestic retail lender by number of customers, tumbled 6.7 per cent to €2.41, while Bankinter slipped 5.3 per cent to €3.24.

Banc o Popular fell 4.7 per cent to €2.15.

However, bigger banks with less exposure to the domestic market were not spared. Santander fell 4.5 per cent to €4.64, while BBVA slipped 4.7 per cent to €5.01.

Analysts at Royal Bank of Scotland said Spain’s recapitalisation program would not solve its banking problems and estimated Spain’s seven biggest banks would need an additional €68bn of capital to cushion against bad loans.

The wider Ibex 35 dropped 2.8 per cent to 6,812.7, the lowest closing point in nearly 9 years.

Meanwhile, Spanish bond yields climbed 23 basis points to 6.07 per cent. Borrowing costs above 6 per cent are considered by traders to be unsustainable for Madrid.

In Athens, where stocks hit 20-year lows on Tuesday, the Athens General index fell 0.9 per cent to 615.12.

The wider FTSE Eurofirst fell 0.3 per cent to 1,014.46.

In Milan, Mediase t helped to drag the FTSE MIB index down 1.2 per cent to 13,771.82. Shares in the broadcaster owned by Silvio Berlusconi, the former Italian prime minister, fell to an all-time low after it announced on Tuesday that a slump in advertising sales had dragged first-quarter net profit down by 85 per cent year-on-year.

France’s CAC 40 fell 0.2 per cent to 3,118.65.

In Frankfurt, positive trade data lifted stocks slightly, with the Xetra Dax rising 0.5 per cent to 6,475.31.

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