European bank stocks slumped the most in more than two months after Greek Prime Minister George Papandreou called a referendum and a parliamentary confidence vote, potentially derailing bailout efforts.
France’s Societe Generale SA, National Bank of Greece SA and Milan-based Intesa Sanpaolo SpA led the Bloomberg Europe Banks and Financial Services Index 6.2 percent lower, the steepest drop since Aug. 18. Societe Generale and Intesa plunged 16 percent and National Bank fell 15 percent. All 46 members of the benchmark declined.
Papandreou’s gambit risks pushing the country into default if rejected by voters, raising concerns about contagion to larger countries such as Spain and Italy. Today’s losses erase the index’s entire gain since European leaders agreed last week to cut Greece’s debt load, recapitalize banks and boost the region’s rescue fund to 1 trillion euros ($1.4 trillion).
“It’s disappointing,” said Georg Kanders, a Dusseldorf, Germany-based analyst at WestLB AG. “The market was just getting used to the rescue package, and if the Greeks don’t want it, it would be obsolete.”
Leaders from the Group of 20 nations meet at a summit on Nov. 3-4 in Cannes, France as they seek financial help from China and cooperation from the International Monetary Fund.
‘Major Political Gamble’
Papandreou’s popularity has plunged after a raft of austerity measures to cut pensions and wages and increased taxes sparked a wave of social unrest. An opinion poll published Oct. 29 showed most Greeks say the accord on a new bailout and debt writedowns is negative.
Papandreou’s grip on power weakened before a confidence vote on Nov. 4 as his decision to call a referendum on a new bailout package provoked a lawmaker rebellion. Six members of the party called on the premier to resign in a joint letter, Athens News Agency said today.
Pacific Investment Management Co. Chief Executive Officer Mohamed El-Erian called the decision by Papandreou a “major political gamble.” The European Union said today it trusts that Greece will honor its commitments to the euro area and the international community.
The euro fell 1.4 percent to $1.3757 at 5:45 p.m. in London. It sank 2 percent yesterday, the sharpest slide since August 2010. The yield on 10-year German bunds fell as much as 29 basis points, the most on record, as investors sought assets perceived to be safest. Greek two-year yields climbed to a record high 87.28 percent.
The BdB Association of German Banks, which represents lenders including Deutsche Bank AG and Commerzbank, said the planned referendum has led to “significant” uncertainty on financial markets and risks delaying or putting on ice progress on the details of the EU’s rescue package.
Banking stocks also declined after MF Global Holdings Ltd., the broker-dealer run by former Goldman Sachs Group Inc. co-chairman Jon Corzine, yesterday filed for bankruptcy protection after making bets on European sovereign debt.
Credit Suisse Group AG, the second-biggest Swiss bank, fell 8.2 percent after saying it will cut about 1,500 more jobs and reorganize its securities unit after the division reported its first quarterly loss since 2008. The shares were down 2.1 francs at 23.50 francs.
Danske Bank A/S, Denmark’s largest lender, declined 7 percent after reporting a third-quarter loss when analysts had predicted a profit. The lender said it will cut 2,000 jobs to adjust to a tougher operating environment.
Commerzbank AG fell 9 percent in Frankfurt to 1.62 euros. UniCredit SpA analysts said in a note to investors that they expect Germany’s second-biggest lender to “take an early hit” on its Greek government bonds, leading to a third-quarter loss.