US Bank Shares Off on Fears of Turkey’s Lira Dive
$GS, $BAC, $BK
Monday, US bank shares fell for a 3rd straight session running as investor appetite for risk weakened on worries that a currency crisis in Turkey would spread to other countries.
The Turkish Lira has collapsed on concerns about President Tayyip Erdogan’s increasing control over the economy and deteriorating US relations, falling as much as 12 percent at one stage on Monday.
The S&P 500 Financial sector index was the biggest drag on the benchmark index with big banks among the leading losers. The S&P bank index fell 0.9% Monday and was on track for an almost 3% fall over 3 sessions.
The US banks with the biggest disclosed Turkey exposure in the second or first quarters were Goldman Sachs (NYSE:GS), down 1%, Bank of New York Mellon (NYSE:BK), down 1.4% and Bank of America (NYSE:BAC), down 1.9%.
While US banks look to have limited direct exposure, investors worried Turkey’s problems could expand overseas.
We here at HeffX-LTN do not think Turkey in and of itself is a big concern for US banks. Exposure is low, the concern becomes if there is contagion and it spreads to other emerging markets and other parts of the world. However, we see this as a short lived event.
In research Keefe, Bruyette & Woods listed Goldman as the most exposed to Turkey with total credit exposure of $2.53 billion or 3.5% of tangible common equity (TCE) in June, mostly with non-sovereign counterparties and borrowers.
Goldman Sachs shares have fallen in the last four sessions, with a 1.8 percent drop on Friday.
We see the anxiety from the last financial crisis loom over stocks, and typically all that is needed is a spark to get people’s attention, and once thing settle the money comes back.
There’s a lot of stop gaps in between a country experiencing stress and a complete financial crisis.