The UK banking sector was in disarray once again on Friday with Barclays PLC (LSE:BARC) leading the charge lower.
Lloyds Banking Group PLC (LSE:LLOY), HSBC PLC and NatWest PLC were also on the decline.
The combined losses of the quartet plus Standard Chartered PLC (LSE:STAN) were £8.5bn.
The renewed volatility was prompted by worries over Deutsche Bank, which has seen the cost of insurance against default soar.
Shares in the German giant fell 13.5%, sparking a pan-European financial stocks sell-off.
Against this backdrop, two leading investment houses provided their analysis of UBS, which is in the process of acquiring Credit Suisse, the sector’s previous problem child.
Jefferies downgraded its recommendation on the combined entity to ‘hold’ from ‘buy’, saying it preferred BNP-Paribas, the French group.
“[The] deal maths are compelling on a three-year view…but risks & uncertainty are high in the next 12 months,” it said in a note to clients.
“We need evidence that restructuring progresses, without hurting UBS' franchise much, to get confidence in the re-rating potential.”
This sentiment was echoed by Citi, which maintained its ‘buy’ recommendation but moved the stock to a ‘high-risk’ rating.