Europe's lenders sucked into global banks rout

A dramatic sell-off in US bank stocks spilled over into Europe on Friday, as some of the region's biggest banks saw their shares tumble in their largest decline in nine months.

Europe's STOXX banking index fell more than 4% and was set for its biggest one-day slide since early June, with declines for most major lenders, including HSBC, down 4.5%, and Deutsche Bank, down 7.9%.

Shares in Italy's UniCredit and Intesa Sanpaolo also fell sharply.

The global rout in bank stocks was prompted by Silicon Valley Bank, a major banking partner for the US tech sector, being forced to raise fresh capital after losing $1.8 billion selling a package of bonds to meet depositor demands for cash.

Neil Wilson, Chief Market Analyst at Markets.com, said that the episode could be the "straw that breaks the camel's back" for banks after worries about ever higher interest rates and a fragile US economy.

The episode underscored the vulnerability of banks, many of which were propped up by taxpayers' cash following the global financial crisis more than a decade ago. That crash and the economic fallout from the pandemic led central banks and governments to print trillions to support the economy but they are now seeking to rein that in.

Investors in SVB's stock had fretted over whether the capital raise would be sufficient given the deteriorating fortunes of many technology startups that the bank serves.

SVB's CEO Gregory Becker had been calling clients to assure them their money with the bank is safe, according to two people familiar with the matter.

But some startups have been advising their founders to pull out their money from SVB as a precautionary measure, the sources added.