By Joice Alves
LONDON (Reuters) -European bank stocks rose on Monday, rebounding from last week’s declines, amid improved sentiment in the banking sector after a buyer emerged for the deposits and loans of U.S. lender Silicon Valley Bank.
Deutsche Bank shares helped lift European bank stocks, which fell almost 4% on Friday, after a sharp jump in the largest German lender’s credit default swaps (CDS), a type of insurance for bondholders, exacerbated worries around the health of the European banking sector.
First Citizens BancShares said on Monday it bought all the loans and deposits of failed SVB. Under the deal, unit First–Citizens Bank & Trust Company will assume SVB assets of $110 billion, deposits of $56 billion and loans of $72 billion.
Earlier this month, the sudden collapse of tech-focused SVB triggered the worst banking shock since the 2008 global financial crisis.
A “relative calm returned amid the choppy seas of the banking crisis as a buyer was found for Silicon Valley Bank’s assets,” said Neil Wilson, chief market analyst at Markets.com.
Shares in several mid-tier U.S. lenders also rose sharply on Monday.
The STOXX banks index was up 1.4% at 1150 GMT after opening 2.3% higher, supporting the pan European STOXX 600 index, which rose 1.1%.
Deutsche Bank shares rallied more than 5%, after an 8.5% fall on Friday. Its CDS [DB5YEUAM=MG] fell to 191 basis points, after shooting up above 220 bps on Friday – the most since late 2018 – data from S&P Market Intelligence showed.
“It looks like Friday’s panic over Deutsche Bank was a bit misplaced. But the steady drain of deposits from banks means a slow motion problem is in the making, and could result in a contraction in lending that brings on a recession,” Chris Beauchamp, chief market analyst at IG Group.
“This is the bigger risk than the hunt last week for the next domino to fall in the global banking system,” he added.
Lenders across the region have had a rough ride this month, with a state-orchestrated rescue of Credit Suisse by rival UBS and turmoil among regional U.S. banks fuelling concerns for the sector.
(Reporting by Joice Alves, additional reporting by Chiara Elisei; Editing by Amanda Cooper and Sharon Singleton)
