Commerzbank was the biggest faller in a slew of disheartening banking results in the euro zone this week, while weak crude prices also buffeted the financial bloc.
The German lender reported a steep decline in its Q2 capital and the STOXX 600 index dropped nearly 0.5 percent to 339.6 in this morning’s early session. Overall, the index has declined 8 percent this year even though it reached a 4 week high in the last session.
After the announcement of Commerzbank figures went public, shares dropped 5 percent. Reasoning for the decline was put down to Italian sovereign debt exposure and pension liabilities.
Experts in the field say that while the company still has an exceptional purchase rating, and the current valuation for its stock is on the low side.
“Profitability remains a slight issue,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management.
“Overall though, Commerzbank has done extremely well to shuffle around its business to adapt to the challenges of recent years and we will see the bank return to its previous high levels before too long,” he added.
Friday saw the release of key European bank stress tests and investors were understandably cautious, reflected by a 2 percent drop in the bank index making the banking sector the worst performing industry not just of the quarter but of the whole year.
Super-low interest rates have not helped the situation in Europe and some of the top banks have seen their capital stretched to critically low levels. Lenders such as Deutsch Bank and UniCredit are down 6 percent.
Meanwhile, in the oil sector, BP failed to keep up with second-quarter targets and dropped nearly 3 percent due to falling oil prices affecting their operating margins. The British oil major announced they would reorganize its investment budget for the coming year in response to the decline.
Another Q2 faller was Mediaset, an Italian broadcaster, who were in line for a merger with a French media company who later pulled out of the deal. Their stock dipped 13 percent.
According to data from Goldman Sachs, there have been pleasant surprises included in the start of the earnings season, with basic resources and industrial goods doing well. The worst performers were real estate, banking and household goods, the report said.
By the end of next week over 50 percent of the companies on the STOXX 600 will have reported their earnings.
