Bank and financial services stocks dragged European markets lower on Friday as concerns remained about the health of the sector, with news of a US probe into Credit Suisse AG and UBS Group AG piling more pressure on the stocks.
The pan-European STOXX 600 index fell 1.4 percent to 440.11 points, but gained 0.9 percent over the past five sessions due to a sharp recovery early in the week.
In the UK, the FTSE 100 lost 1.3 percent to 7,405.45 points, after gaining 1 percent over the week, while the domestically focused FTSE 250 also shed 1.3 percent on Friday, reversing most of its gains over the week and closing down 0.1 percent from Friday last week.
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Shares of Swiss banks Credit Suisse and UBS fell 6.4 percent and 6.3 percent respectively, after reports that they are among the banks under scrutiny in a US Department of Justice probe into whether financial professionals helped Russian oligarchs evade sanctions.
Austria’s Raiffeisen Bank International slipped 1.8 percent after reports that the European Central Bank (ECB) is pressing it to unwind its highly profitable business in Russia.
Overall, European banks fell 2.3 percent, with Deutsche Bank down 5.4 percent after a sharp jump in the cost of insuring against the risk of default late the day before.
Financial services shares were down 1.5 percent.
German Chancellor Olaf Scholz said after an EU summit that “there is no reason to be concerned” about Deutsche Bank as the lender is “very profitable.”
ECB President Christine Lagarde told EU leaders that the eurozone’s banking sector is “resilient because it has strong capital and liquidity positions,” an EU official said.
However, City Index analyst Fiona Cincotta said that the sell-off in bank shares has highlighted “just how fragile sentiment is towards the sector.”
“As central banks continued hiking rates this week, the outlook is looking increasingly shaky,” she said, adding that “Deutsche Bank has come under the spotlight as a possible target for contagion risk.”
Additional reporting by Staff Writer
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