European bank stocks took a dive on Thursday as fear spread among investors that the U.S. subprime crisis will take another huge chunk out of profits in the fourth quarter.
Credit Suisse reported big writedowns on credit market exposures on Thursday and its shares fell 4.75 percent at 1410 GMT after the bank took writedowns of over 2.2 billion Swiss francs ($1.90 billion) in leveraged loan commitments, residential mortgages and collateralised debt obligations.
The bank's investment banking division barely broke even. Some investors were upset because Credit Suisse said it had "marked to market" -- or adjusted the value of its portfolios -- to the end of September despite a perception that market conditions deteriorated sharply in October.
But UBS, which on Tuesday reported its first quarterly loss in five years and took 4.4 billion Swiss francs of subprime-related charges on its fixed-income investments, was even worse hit and its shares fell 5.49 percent.
Analysts said talk was making the rounds that UBS may have to make further writedowns running to billions of francs in the final quarter. The bank's subprime woes were triggered by a disastrous hedge fund venture called Dillon Read Capital Management which the bank closed in May.
"There is no doubt on people's minds that U.S. subprime pricing is getting worse," said Alan Webborn at SG securities in London. "It shows the tail of this credit crisis is long and we probably have not seen the bottom of it."
Investors were also spooked by a 7.6 percent fall in the share price of Citigroup after an analyst said the largest U.S. bank, which has been lashed by the subprime storm, may have to raise $30 billion in capital.
The DJ Stoxx European banking index, tracking the region's main bank stocks, slid 3.32 percent.
Banks worldwide have taken charges totalling more than $20 billion on holdings in mortgage-backed securities which have been hit by a rising tide of defaults in U.S. subprime mortgages -- loans extended to borrowers with patchy credit histories.
British, Italian, German and French banks were also hurt.
"There is continued concern about how much more charges they (banks) are going to have to take against their exposures," said a London-based analyst with a U.S. investment bank. "How deep is this going to go?"
Barclays, a big player in the structured finance and leveraged finance markets, both badly hit by the subprime crisis, fell 5.88 percent and HBOS was down 4.24 percent.
BNP Paribas, also active in structured finance and derivatives, fell 4.69 percent and Germany's Deutsche Bank, which had cheered investors on Wednesday with better than expected results, lost 3.87 percent.
Spain's two biggest banks, BBVA and Banco Santander, which have been unscathed by the subprime meltdown, were dragged down, falling 2.12 percent and 2.55 percent, respectively.
"There is no wish to buy banks at the moment," said Webborn. "It's a matter of sentiment. What is driving this is the problems in U.S. subprime."