European countries pledged billions more euros to support ailing banks and aid bank stocks on Wednesday, but the threat of nationalisation or forced state help hit Britain's Barclays and Belgium's KBC. Belgium is planning a second round of help for banks, but the plan didn't restore confidence in its lenders and shares in KBC tumbled by more than a third.
-- Belgium plans second bailout, KBC shares crash 27 percent
-- France, Germany, Spain also offer more support
-- Bank shares mixed, Barclays falls 21 percent
-- BNP Paribas says not planning to issue new shares
France, Germany and Spain also offered more help, but the prospect that more dramatic intervention will be needed as economies tip into recession tugged the European banks index to a 16 year low. Banks bounced back as their US peers rallied in early trading to claw back some of Tuesday's hefty losses, and by 1450 GMT the European DJ Stoxx Banking index was up 2 percent at 117.3 points, after falling as low as 109.7, its lowest level since 1993.
In the US, regional bank shares rose after strong quarterly results from Northern Trust. There was also a 60 percent increase in profits at Hudson City Bancorp Inc, one of the nation's largest savings and loans, and PNC Financial Services Group Inc said it expects to report a profit for the fourth quarter, albeit below expectations.
The mood surrounding banks remains difficult "because of the absence of confidence on balance sheets and a lack of confidence on the macroeconomic environment," said Arturo de Frias, analyst at Dresdner Kleinwort.
"On top of that there's an increasing concern about nationalisation," he said. British banks are at the heart of the worry. Barclays crashed 35 percent and Lloyds Banking Group lost a quarter in early trading amid concern they and Royal Bank of Scotland could need more state help or be fully nationalised. They pared losses in another frenetic session, and by 1445 GMT Barclays was down 15 percent at 62 pence and Lloyds was down 1.3 percent at 44.2p. RBS rallied 15 percent to 11.9p.
The chairman of the British parliament's Treasury Committee urged the government to nationalise RBS and Lloyds as the global financial crisis deepens, and Barclays could be next in line if its rivals go into state hands as worried persist about its capital position, analysts said. "If you are an investor you are very unlikely to be willing to buy any bank that has nationalisation as a remotely realistic scenario," de Frias said. "No matter how much stocks fall there is always 100 percent downside."
News that UK policymakers want the financial regulator to reintroduce a ban on short-selling banks if it is warranted helped the rebound. Britain threw its banks a second multi-billion pound lifeline on Monday and more countries stepped in with help.
France confirmed it would provide a second tranche of aid to its banks of up to 10.5 billion euros in a bid to shore up capital, on condition that banks limit dividend payments and ban executive bonuses. Executives of all the top banks have said they will not take bonuses for 2008.
BNP Paribas said it is looking at the terms of the scheme and could take 2.55 billion euros. It also said it was not considering issuing new shares, rejecting speculation it was about to do so and sending its shares higher after an early fall. They were last up 2 percent at 24.2 euros. SocGen jumped 10 percent after saying its 2008 net profit should be around 2 billion euros, below forecasts but showing more resilience than many rivals.
Belgium's plan to launch a second bailout to help banks hit by a fresh wave of concern about their capital position will see a committee of experts asked to assess the options. Belgium has already helped bail out Fortis and Dexia and provided 3.5 billion euros to KBC, but KBC's shares have been dogged by mounting speculation it will be forced to make further writedowns of its credit portfolio and need fresh funds.
KBC shares were down 29 percent at 6.9 euros, after hitting 6.1 euros, and have lost two-thirds in the past week. Spain lent its banks 4 billion euros, accepting mortgage-backed debt as security against a series of two-year loans in an attempt to kick-start lending to businesses and consumers.
Switzerland's Credit Suisse could report a full-year loss of up to 6 billion Swiss francs ($5.3 billion), according to a local newspaper report, but analysts reckon the loss could be 1 billion euros higher. Its shares shrugged off the worry and both it and UBS rose over 6 percent. Stricken German investment bank Hypo Real Estate said late on Tuesday it would get an additional 12 billion euros in state guarantees and was still in talks with the government about further support. Its shares fell 6 percent.