Barclays and Natwest stock plunge warns of ‘looming global recession’
The FTSE 100’s banking giants have weighed on the index since Trump’s tariff onslaught and analysts have warned their losses could be a global recession indicator.
Barclays plummeted nearly five per cent during midday trading on Monday. The lender has lost nearly 20 per cent in the last five days.
Meanwhile, Natwest sank over seven per cent after markets opened, before clawing back some gains. The bank was down one per cent by midday.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Banks are seen as barometers for economic health, and given the steep losses, red lights are flashing about a looming global recession.”
The FTSE 350 bank index was down two per cent on Monday. The sector index was the FTSE 100’s second-best performer out of the other 39 sub-groups in February, before tariffs took a bite out of UK lenders.
The index has lost nearly 16 per cent in the last month.
Despite this, Lloyds clawed back gains on Monday, and edged up 0.1 per cent at midday.
Increased turbulence could ‘dampen’ capital markets
Vivek Raja and Gary Greenwood, equity analysts at Shore Capital, said: “Changes in economic activity levels could affect demand for credit and bad debt formation.”
They added Asia-focused banks, such as HSBC and Standard Chartered, were likely to suffer a bigger blow than their large-cap more UK-domestic counterparts, which includes Barclays, Lloyds and Natwest.
Raja and Greenwood said the moderation of interest rates and their path forward could impact lender’s net interest margins, which are important metrics for a bank’s profitability from lending activity.
“Increased market turbulence could have a dampening impact on capital markets activity levels while potentially bolstering market activity,” the analysts added.
Greenwood told City AM domestic banks were likely to have corporate clients “that are directly exposed to tariffs”.
“Banks are basically just geared plays on the underlying economies in which they operate,” he added.
For small and mid-cap banks, Raja and Greenwood anticipated a lessened blow.
They added the likes of Arbuthnot Latham, Paragon and Vanquis were “domestically focused and therefore less at risk from the international trade fallout”.
Whilst the smaller lenders have not seen losses as big as their FTSE 100 counterparts, they have still not been able to escape the global sell-off.
Vanquis sunk nearly five per cent at midday. Paragon fell 1.5 per cent and Arbuthnot dipped 0.59 per cent.