Shares in UK banks take a hit on their exposures to crisis

Tim Wallace
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SHARES in leading UK banks fell yesterday as investors fretted over their exposure to the Cypriot crisis, with savings deposits in the country set to be taxed and the country’s President warning that the economy could be just days from collapse if action is not taken.

The banks involved may face further trouble if the crisis spreads further to other peripheral nations.

Barclays’ shares fell 4.41 per cent. The bank had on-balance sheet exposures to Cyprus of £184m at the end of last year, down from around £300m the year before.

Lloyds’ exposures stand at £104m, largely in corporate business. Its shares dipped 1.33 per cent yesterday. RBS’s exposure to Cyprus comes in at £330m, sending its shares 3.44 per cent lower.

Meanwhile HSBC’s full-year results listed its exposures to the country at $400m (£260m). The lender’s shares were flat yesterday.

But the lenders have much larger exposures to some of the Eurozone’s other peripheral nations, which analysts have suggested could be at risk of contagion from the crisis as worried savers look to protect their deposits.

For instance Barclays’ exposures to Spain come in at £23.05bn, and exposures to Italy stand at £22.69bn.

Similarly HSBC’s total net exposure to Spain comes in at $12.1bn, and to Italy $9.6bn.

Portugal’s President Anibal Cavaco Silva yesterday described the move to tax Cypriot deposits as “dangerous” for the other peripheral countries.

“Europe is taking a very dangerous path ... Sometimes I think common sense appears to have migrated elsewhere,” he said.

“It is in all the books that when there is lack of confidence in a banking system, there is no country or nearly no country that escapes, because confidence is one of the pillars of a financial system.”

Meanwhile analysts warned the trickle of deposits from peripheral banks could become a flood on the Cypriot bailout deal.

“The risk of holding deposits in Cyprus is now clearly higher,” said RBC Capital Markets’ Robert Noble.

“With interest rates at historic lows there is little upside to holding a deposit in Cyprus if it is not in fact riskless.”