Bank stocks worldwide tumble
LONDON/NEW YORK (Reuters) - Banks stocks fell worldwide on Thursday as concerns swelled that soaring loan losses, tight credit and deteriorating economies would overwhelm lenders' efforts to cut costs and preserve capital.
European bank shares tumbled to an 11-year low, and U.S. banks approached a 12-year low.
Goldman Sachs Group Inc set plans to cut 3,300 jobs, or 10 percent of its workforce, people familiar with the plan said, as the Wall Street stalwart copes with an expected downturn in trading and investment banking results.
In Europe, Credit Suisse Group confirmed details of a 1.3 billion Swiss franc ($1.1 billion) quarterly loss and said the rest of the year would be tough.
Swedish banks took a hit as Nordea Bank AB , Skandinaviska Enskilda Banken AB (SEB) and Swedbank AB reported lower operating profits, and Swedbank said it might take new capital from the Swedish savings banks that own it.
And in Canada, the government reinforced its banking sector with loan guarantees that will begin next month and continue at least until next May, mirroring large U.S. support programs. Finance Minister Jim Flaherty said the move would help ensure Canadian banks aren't at a competitive disadvantage.
The DJ Stoxx European banking index closed down 2.1 percent after earlier falling to its lowest level since 1997.
The Standard & Poor's Financials Index was down 5.7 percent in mid-afternoon trading and remained only a few percentage points above a 12-year low set on October 10.
GOLDMAN CUTS JOBS
Goldman's job cuts are unrelated to its usual periodic thinning of the ranks to eliminate workers it believes are not performing as well than others.
The cuts follow this year's demise of Bear Stearns Cos and the bankruptcy of Lehman Brothers Holdings Inc , and the planned purchase of Merrill Lynch & Co by Bank of America Corp .
Goldman and rival Morgan Stanley last month adopted commercial banking structures, which will result in their taking less risk, hurting profitability. Shares of Goldman were down 9.3 percent in afternoon trading.
SunTrust Banks Inc , the last major U.S. commercial bank to post third-quarter results, said profit fell 26 percent as loan losses more than tripled. It said core results were "soft" relative to its dividend payout.
The bank said it may take $1.6 billion to $4.9 billion from U.S. Treasury Secretary Henry Paulson's $250 billion bank recapitalization plan. SunTrust shares were down 12.8 percent in afternoon trading.
LATIN AMERICA IN FOCUS
In Europe, Spain's Banco Santander SA fell 4.8 percent and Banco Bilbao Vizcaya Argentaria SA fell 4 percent amid heightened worry about risk across Latin America, where both have large operations. That follows Argentina's decision to nationalize its private pension system.
"Emerging markets growth expectations have to be adapted to a more sober reality," said Arturo de Frias, an analyst at Dresdner Kleinwort.
Meanwhile, shares of Asia-focused Standard Chartered Bank fell 4.9 percent, and National Bank of Greece slid 12.6 percent. Credit Suisse fell 4.2 percent, SEB fell 9.5 percent, and Swedbank lost 11.4 percent.
Analysts fret that plans unveiled by several countries in the last two weeks to recapitalize banks and add liquidity won't be enough to avoid a deep, broad recession.
Strains also appeared as the head of Germany's largest bank, Deutsche Bank AG's Josef Ackermann, said he would be ashamed if he had to tap that country's 500 billion euro ($643 billion) rescue package. Only regional lender BayernLB has so far said it will take the funds.
"Steps taken (by policymakers) do seem to have stopped the banking system collapsing," said Bruno Paulson, a banking analyst at Sanford C. Bernstein in London. "That doesn't mean we're not going to get recessions."
(Additional reporting by Patricia Uhlig in Frankfurt; Daisy Ku in London; Jesus Aguado in Madrid; Ian Simpson in Milan; Joseph A. Giannone in New York; Louise Egan in Ottawa; and Simon Johnson and Eva Odefalk in Stockholm; Editing by Paul Bolding, Sharon Lindores and John Wallace)