Global Banks Lost $459 Billion in Market Crash as Goldman Sachs Loses on Rate Fluctuations

Investors have lost almost half a trillion dollars in bank stocks around the world in the worst debacle for the financial sector since the start of the Covid-19 pandemic.

Financial stocks fell this week due to the effects of the crash Bank of Silicon Valley spread through world markets. Banks in the US, Europe and Japan collectively lost $459 billion in market value this month – a 16 percent drop, the sharpest drop since March 2020.

The biggest losses were in the US, where the KBW Bank index lost 18 percent in March. The European Stoxx 600 banking index fell 15 percent, while the Japanese Topix banking index fell 9 percent.

Efforts to stabilize the financial system and prevent panic in general have been only partially successful. Shares of troubled California bank First Republic dropped by more than a quarter in Friday afternoon trading despite a $30 billion cash injection from Wall Street banks including JPMorgan Chase and Goldman Sachs.

Shares of Credit Suisse fell 8% even after delivering 50 billion Swiss francs ($54 billion) on Thursday. emergency line of credit from the Swiss central bank. Credit default swaps and Zurich lender bonds traded at troubled levels.

Volatile markets have hurt even banks considered stronger, with some affected by two-year Treasury yields falling at the fastest rate since 1987. Goldman lost about $200 million. in its trading department, which deals with interest rate products, according to people familiar with the matter. Goldman declined to comment.

On Friday evening, global regulators held talks to discuss how to assuage concerns about the state of the financial system, with some focusing on options for stabilizing Credit Suisse and its international subsidiaries.

Executives and board members of the Swiss lender are also discussing the future of the 167-year-old bank, which has been going through one crisis after another for years.

“Obviously, we need to rethink the strategic plan,” said one of the participants in the emergency talks. “It’s been a week of madness. We’re looking at everything we can do. Nothing is off limits. But no matter what happens, the bank will survive.”

Another senior lender official said they need to “think about the different contingency options we have.” “We have a good strategy, but now the question is whether market conditions and investor support will allow it time to work.”

Options being considered include splitting the bank and raising funds through a public offering of its spin-off Swiss arm, with the sale of its wealth and asset management divisions, the two sources said. This will most likely compete with UBS because the government and regulators would prefer that they remain under Swiss control.

Adding to the pressure on management, one of the bank’s largest shareholders is now publicly calling for the separation of an in-house unit to protect savers, mortgages and small businesses.

“We need decisive action. A complete branch of the Swiss branch is required. We need to isolate it now because the infection is spreading to him,” said Vincent Kaufmann, chief executive of the Ethos Foundation, which represents Swiss pension funds and institutions holding up to 5% of the shares.

Analysts estimate domestic bank Credit Suisse is worth twice as much as the group’s entire market capitalization.

“SNB. [Swiss National Bank] we need to intervene,” added Kaufmann. “I got a call from Swiss pension funds who are very worried about their risks and are reducing them.”

Other proposals to be considered over the weekend include accelerating cuts at the investment bank or even shutting it down entirely, the people added.