Bank stocks plunged internationally on Thursday, as revealed in reports put out by various companies’ showing their Q2 earnings, demonstrating the steep effects of the COVID-19 pandemic still hovering over world economies.
A few of the banks negatively affected in the second quarter were Lloyds Bank, which reported loss provisions at a rate higher than was forecasted, and BBVA and Standard Chartered, which both saw profits slide.
The damaging effects of covid-19 is reflecting in the Quarterly earnings reports and that has put European investors on the edge of their sits.
Compounded by a record-breaking contraction in the US economy, these dreary reports brought on a sell-off across the banking sector. The Euro Stoxx Bank index, which follows the trends of the biggest banks in Europe, took a downward dive by more than 3%, and the MSCI European Banks index (which features both British and European banks) fell by 2.6%.
Key stock markets were also dragged down on Thursday. For example, the FTSE 100 fell by 2% before noon, and the DAX and Spanish IBEX 35 fell by 3% and 2.7% respectively.
Based on analysis, these sell-offs indicate that investors are taking a more pessimistic approach to business in the wake of more uncertainties brought on by the COVID-19 pandemic. Lloyds CEO Antonio Horta-Osório commented:
“We have seen the UK economy deteriorate since the first quarter.” His comment comes as the bank’s half-year profits were completely submerged by the need to set aside £2.4 billion as a loss buffer – £1 billion greater than analysts estimated. This also saw shares in Lloyds fall by 9%, an 8-year low.
Barclays is also reported to have fallen below analysts’ expectations in its Q2 results, while Santander announced a quarterly loss of about €11.1 billion, marking the biggest loss in its 163 years of operation.
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