European Bank Stocks Fall as ECB Details Health Check

European banking stocks slid as the European Central Bank unveiled details of its plan for checks on the financial health of the euro area’s biggest lenders.

The Bloomberg Europe Banks and Financial Services Index fell as much as 2 percent, the biggest intraday drop this month. Banks in Europe’s periphery led the decline, with Bankinter SA (BKT) of Spain losing as much as 4.1 percent and National Bank of Greece SA (ETE) sliding as much as 5.3 percent.

European officials have entrusted the ECB with overseeing the region’s financial system to prevent a repeat of turmoil that set off the euro area’s worst recession since World War II. The central bank said today that it will apply a stricter definition of capital in the final part of its assessment of bank balance sheets as it assumes the regulatory role.

“Some investors just find the situation too hot and are getting out of banking stocks in peripheral European countries, like Spain and Portugal,” Stefan Bongardt, a European banking analyst with Independent Research GmbH in Frankfurt, said today in a phone interview. “The problem with Spanish banks is that they haven’t made as much progress as some of their peers on stricter capital ratios. Many people have also been skeptical about how they’re valuing their real estate portfolios.”

Nordea Bank AB (NDA), the Nordic region’s largest lender, and Svenska Handelsbanken AB (SHBA) of Sweden also declined. Nordea reported third-quarter profit that fell short of analysts’s estimates today, while Handelsbanken’s 14 percent profit growth in the period trailed the 19 percent advance announced by Stockholm-based competitor Swedbank AB (SWEDA) yesterday.

To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.