Banks' shares in a freefall

Banks' shares down as much as by 24% amid the fresh fear of huge losses by banks

FTSE 100 was down by almost 5% this Wednesday after 5 consecutive-days-loss. The banking sector was among the worst performers on that day. The loss for all the banks, but Standard Chartered, continued.

Asian markets were up on average about the time trading time started in London Stock Exchange (LSE). This morning, there were slight rises in the banks' shares and we saw pretty much flat price-level until 3:45PM. Then, there was an announcement that the chairman of Royal Bank of Scotland (RBS), Sir Tom McKillop is to be replaced by Sir Philip Hampton, the chairman of Sainsbury's. Then shares of all banks plunged.

For some peculiar reason, Barclays' shares were hit hardest, falling by more than 24% to its lowest level for at least 6 years, 98p bringing its market capitalisation to only £9.1bn. This is the bank that was seeking to take-over ABN Amro, then Netherland's biggest bank for £46bn and this is the bank that made more than £7bn pre-tax-profit for both 2006 and 2007. This means Barclays' shares are down by almost 47% in the last 4 trading days.

RBS' shares were hit second hardest, down by 14.8%, again to a historical low level of 34.7p. Lloyds TSB saw 7.1% drop in its share values, again 4th-day-loss in a row as the shares of RBS and Barclays. HSBC (Hong Kong and Shanghai Banking Corporation), once the biggest bank in the world in terms of market capitalisation, saw slightly milder drop in its shares, however its share price stands at historic low level of 535.75p.

The only bank, which didn't see fall in its shares in LSE, was Standard Chartered, although its share price still dropped in the last 45 minutes of trading and ended 0.85% up from its Thursday closing price.

It is not very clear what exactly caused these sudden plunges in all banking shares today. Of course, today was the day when the ban on short-selling was lifted, which would have created more dumpings of the shares than otherwise.

Today we also heard very gloomy news from US Banks, in particular Citigroup, was-the-largest-bank-in-the-world. Citigroup reported its loss for 5th quarter-in-a-row, bringing its total loss for 2008 to staggering $18.7bn. As a result, it decided to restructure itself and to split into two: Citicorp and Citi Holdings. Meanwhile, its rival and peer Bank of America is to get a fresh bail-out of $20bn from the US government and further $118bn worth of guarantees against its toxic assets.




UPDATE (on 19th January 2009):
Today's plunges in the shares of banks dwarfed Friday's fall. RBS saw massive 66.6% drop in its shares, meanwhile Lloyds Banking group saw 33.9% drop in its share price on its first trading day, after the merger of Lloyds TSB Group and HBOS. This time around, Standard Chartered didn't escape the fate of its rivals.

Royal Bank of Scotland (RBS) announced that it is expected to report a loss of between £7bn and £8bn, excluding the costs related to the takeover of ABN Amro in 2007. The total cost could reach £28bn, making it the biggest loss in the history of British Corporation and this will be almost double the current record of £15bn made by Vodafone in 2006. As a result, the shares of RBS, plunged by more than two-thirds, bringing its shares down to around only 11.6p (it reached only 10p around half past two). It was trading at aroud 50p only 6 days ago (or only 4 trading days), that's around 80% loss in less than a week. The current level of its share stands at only 1.4% (yes, only 1.4%!!!) of its peak in less than two years ago: 724p on February 20th, 2007. Even, as late as early September 2008, its shares were being traded at above 240p.

Another big loser was, not-so-old, but the new banking group, Lloyds Banking Group. It saw more than a third fall in its share price, bringing its share price down to only 65p. At one time, it was down to 60p.

HSBC, Barclays and Standard Chartered saw 6.5%, 10.2% and 8.1% falls respectively in their shares.