Neither gold, nor incense, nor myrrh. The three kings from the Far East brought nothing but coal to the financial sector. Yesterday the only gift that banks received was a surge of sell-offs in the major European stock markets. Positive developments in the fixed income markets during the first week of the year have done nothing to help, because since Wednesday the Italian bank Unicredit showed the markets that since the sector has several tricky capital campaigns pending, all lenders are under watch.
Yesterday, it was rumored that Deutsche Bank could launch a similar deal. So financial stocks are enduring big declines that are dragging down some of the major stock indexes, which are already in the read for 2012.
It is not surprising that the Spanish and Italian markets had to struggle through the trading day on several battle fronts. Both markets, along with the rest of Europe, had to face the fact that banks are scrambling to raise capital in order to meet regulatory requirements.
But the Spanish stock market has another difficulty to deal with. According to the daily paper The Financial Times, Spain's new Minister of the Economy and Competition, Luis de Guindos, wants banks to provision up to 50 billion euros more in order to cover all the losses taken in the real estate sector.
This figure, which equals nearly 4% of the Spanish GDP, is far greater than was originally predicted by the sector and tightens the noose currently strangling lenders, considering that they will have to source this money among themselves by increasing profits. The news caused major losses for the banks. Shares of Sabadell, Popular, Bankinter and BBVA gave up more than 5%. And Santander fell 4.5%.