UK bank shares tumble on debt fears and stress test worries.
UK banking shares have been in a bit of a hole of late, and the hole deepened on Monday in response to growing worries about the financial shape of Europe.
At the time of writing, Royal Bank of Scotland Group (LSE: RBS) shares were down 4.5%, after a dreadful 2-week spell that has seen the price fall 15%. And Lloyds Banking Group (LSE: LLOY) is down 3.5%, after it saw a promising rise at the start of the month turn tail.
And even Barclays (LSE: BARC), considered by many to be the UK's strongest high street bank, saw a 3.3% drop, on top of a similarly bad month.
But not all the FTSE-100 banks suffered on the day, as HSBC Holdings (LSE: HSBA) and Standard Chartered (LSE: STAN) both saw their share prices pretty much holding steady.
Why so glum?
Why the gloom? Well, it's all down to worries that the banks of Europe are in a worse state than earlier feared, after stress tests failed to bolster confidence. Fears of a Greek debt default are growing, and the market is not convinced of the banks' abilities to handle it or of governments to bail things out.
The European banking Authority announced on Friday, after Europe's stock markets had closed, that 8 banks out of 90 had failed its stress tests, with a total combined capital shortfall of €2.5bn, and a further 16 were said to be close to danger.
However, while that €2.5bn is less than people were fearing, a JPMorgan Chase (NYSE: JPM.US) report published the day after suggests that there are 20 banks needing to shore up their capital, and they may need to raise as much as €80bn in total. Ouch.
The FTSE 100 has continued last week's 2.5% slide, with another 1% lopped off its value on Monday -- that's a 5% fall since early February, as European debt contagion appears to be spreading.
Going to the wall?
And as another sign that investors are fleeing shares and cash, the price of gold topped $1,600 an ounce for the first time -- that's a lot of money for a little bit of essentially useless metal.
With some measures suggesting that institutional investors are acting as if there's a 90% chance of a Greek default, there will be some people who would prefer to see an end to the lingering and get it over and done with as soon as possible.
What do you think? Will the Greeks pull it off, or is the worst now inevitable? Please share your thoughts, below.
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