European Financials Are Getting Slammed

European bank stocks are getting slammed today as fears over the Cyprus precedent take hold across the euro zone.

In Italy, Monte dei Paschi is down 5.3 per cent, Banco Poplare SC is down 4.4 per cent, and Banca Popolare dell’Emilia Romagna and Banca Popolare di Milano are both down 4 per cent.

BofA credit strategist Hans Mikkelsen flagged Italian banks as most at risk in the wake of the Cyprus deal.

Spain is getting hit too, though – CaixaBank is down 3.7 per cent, Banco Popular Español is down 3.5 per cent, Santander is down 2.4 per cent, and Bankinter is down 2.3 per cent.

Even the biggest French banks – BNP Paribas and Société Générale – are down 3 per cent and 2.6 per cent, respectively.

It’s pretty clear what markets are taking away from the Cyprus bailout deal, which forced haircuts on uninsured deposits as a way to help pay for the rescue: the carte-blanche bailout regime in Europe may be over, and markets may have to reprice other European banks accordingly.

Of course, many of these banks have also had a pretty good run in the past few months as part of the broader rally in risk assets that has swept across the developed world, so this could just be a bit of a correction at work as well.

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