The banking sector was hit hardest by a sharp decline of Banco Espiritu Santo's share price, which recalls what happened with Unicredit. The Portuguese bank's stock price plummeted 10.5%, ultimately falling nearly 27%, after it announced a one-billion euro secondary offering in order to raise funds and meet solvency requirements set by the European Banking Authority (EBA). This amount was a quarter of its market capitalization at the time.
Intraday trading hit a 0.855-euro low. "This was the most important bearish indicator during yesterday's session, and it drove down the entire banking sector," said Soledad "Pellón from IG Markets. In fact, among the worst performing stocks on the Ibex 35, the banks led the charge. BBVA led all banks as it gave up 1.78%. Santander, Banco Popular, CaixaBank and Bankinter also closed in the red.
"Investors are fully aware that the banking sector involves more risk than others, so it is more volatile on the stock market and suffers bigger declines," said Iván San Félix from Renta 4. Nor should we forget that the Spanish banks are the primary creditors for Portuguese banks.
Still, Sacyr and ACS were hit hardest during the session as they lost 4.24% and 3.57%, respectively. A devastating report from Credit Suisse, which lowered ACS's target price by 27.8%, caused the stock to plunge to prices not seen since 2005. Credit Suisse supported their decision based on ACS's leverage level and high exposure to a Spanish public sector that is undergoing significant cutbacks. Problems at ACS are exacerbated by Iberdrola's falling stock price, because it is a primary shareholder, holding 16.3% of ACS's capital. According to Credit Suisse, for every 0.5 euros that the electric company loses falls on the stock market, ACS has to provide another 422 million in backing.
