NatWest, M&G and Standard Chartered led early FTSE 100 losses as investors shed exposure to rate-sensitive financial stocks
Shares in some of Britain's largest banks and asset managers fell sharply in early trading on Thursday, extending a turbulent month for UK financial stocks as geopolitical anxiety, shifting interest rate expectations and weakening equity markets combined to drive investors away from the sector.
NatWest Group PLC (LSE:NWG), the high street lender, M&G PLC (LSE:MNG), the FTSE 100 asset manager, and Standard Chartered PLC (LSE:STAN), the emerging markets-focused bank, were among the heaviest fallers, each dropping between 5% and 6% in the first hour.
The trio's shares all went ex-dividend today, accounting for 4.1, 3.5 and 1.4 index points of their declines respectively — meaning much of the apparent sell-off is mechanical rather than a vote of no confidence from the market.
The moves also come as the UK stock market declines from record territory, triggered by renewed tensions in the Middle East that prompted investors to reassess the global growth and inflation outlook.
That shock has kept volatility elevated and accelerated a broad de-risking of cyclical sectors, with banks, insurers and asset managers particularly exposed given their sensitivity to global capital flows and risk sentiment.
For banks, the sell-off reflects two reinforcing pressures.
Escalating Middle East conflict has raised fears of a wider hit to global economic activity and a resulting deterioration in credit quality, increasing the perceived risk on lenders' loan books.
At the same time, persistent inflation has led investors to scale back expectations for aggressive Bank of England rate cuts, which may offer some continued support to net interest margins, the difference between what banks earn on loans and pay on deposits, though deteriorating economic conditions leave credit quality more vulnerable to a prolonged high-rate environment.
HSBC, Lloyds and Barclays had already recorded sizeable declines in earlier March sessions for the same reasons, leaving the broader FTSE financials index in a downtrend through the month.
Asset and wealth managers face a more mechanical problem: falling equity markets directly reduce assets under management, and with them the fee income that drives revenues.
M&G and its peers tend to be sold alongside banks on days when UK indices decline sharply, even though the underlying pressures differ.
Life insurers are less directly exposed to short-term equity swings, but sustained market weakness raises questions about capital buffers and the volume of new business being written, which is enough to push their shares lower on risk-off days.