UK bank shares jumped higher on Tuesday as assurances from the US Treasury Secretary and UK chancellor about their continued support for the sector sparked a surge of buying.
Lloyds, Natwest and Barclays all gained between 5% or 6% as Janet Yellen said the situation in the US is stabilising while reiterating the government there would protect deposits at any smaller bank that runs in to trouble.
It was the collapse of regional banks Silicon Valley and Signature that sparked the latest bout of uncertainty within the sector with the US authorities having to step in and guarantee deposits after runs on both.
Swiss giant Credit Suisse’s forced merger with Zurich-based rival UBS at the weekend added to the jitters but Yellen’s comments provided some relief.
“Our intervention was necessary to protect the broader US banking system. And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion,” she said in a speech to the Association of US Bankers.
Reports that JP Morgan might lead a consortium to rescue First Republic, another US regional in trouble, also helped to boost confidence in the banking sector not only in the US but also in Europe.
In the UK, banks were also buoyed by a strong vote of confidence from chancellor Jeremy Hunt.
In response to questions from his Labour opposite number Rachel Reeves, Hunt told MPs the UK’s financial system is “fundamentally strong” and that UK banks are well-capitalised.
“They now have core capital ratios that are three times higher than before the 2008 global financial crisis,” though the situation is being monitored carefully, he said.
Six central banks around the world, including the Bank Of England and US Federal Reserve, joined forces yesterday to make it easier to borrow dollars.
So far the facility has not been used by a UK bank and analysts suggested this indicates stress levels in the financial system here are low currently.
Lloyds Bank shares were up 2.2p at 48.3p, NatWest 16.9p at 274.7p and Barclays 7.3 p to 143.7p