The 187 banks listed on European financial markets lost $372.9 billion in market value since the beginning of 2020, according to information reported by Capital IQ. HSBC Banking Corporation, the most highly valued bank on the stock market in Europe, bears the heaviest loss ($52.2 billion). Banco Santander and Lloyds Banking Group closed the top 3.

This drop, in market value, only reflects the strong negative sentiment of investors for the securities of these financial companies in the context of the global economic shock. European banks are among the first victims of the current coronavirus pandemic. The disruption of activities in almost all countries in the world has led many sectors or household customers of banks to shut down or reduce their activities. And this has made it difficult to repay loans.

In this context, the interest income on the banking loans has come under pressure. The pandemic also affected another important aspect of bank activities, which is investments. According to data provided by Refinitiv, this financial sector generated $2.2 billion in revenues in the European market in Q1 2020, down 10% from Q1 2019. This is the lowest investment banking revenue for a first quarter in the last 4 years.

Over the last 30 days, the value of the majority of banks listed on European markets has risen. Recent stimulus decisions by the Central Bank and the European Commission have reassured investors, including banks.

Gradually, governments are considering reopening their economies. But the European banking sector will have to remain under surveillance. Corporate and public sector debt has reached record levels, and governments and central banks are running out of options in the event of a shock from a second wave of coronavirus.

Idriss Linge