The FTSE 100's leading banks have dragged down the index in light of President Trump's tariff offensives, with experts cautioning that their losses might signal an impending global recession.
Barclays saw its shares drop nearly five per cent in midday trading on Monday and has endured a nearly 20 per cent fall in the past five days, as reported by .
NatWest also experienced a dip of over seven per cent after the market opened, but later reclaimed some of its lost ground. By midday, it was down by one per cent.
Susannah Streeter, money and markets chief at Hargreaves Lansdown, commented: "Banks are seen as barometers for economic health, and given the steep losses, red lights are flashing about a looming global recession."
As of Monday, the FTSE 350 banking sector index had declined by two per cent. Before being hit hard by tariffs, this sector was the FTSE 100's second-best performer out of the other 39 sub-groups in February.
In the last month, the index has shed close to 16 per cent of its value.
Nevertheless, Lloyds registered a slight recovery on Monday, nudging up by 0.1 per cent at midday.
Increased turbulence could 'dampen' capital markets
Equity analysts Vivek Raja and Gary Greenwood from Shore Capital remarked: "Changes in economic activity levels could affect demand for credit and bad debt formation."
They also noted that Asia-focused banks such as HSBC and Standard Chartered may bear greater impacts compared to largely º£½ÇÊÓƵ-focused peers like Barclays, Lloyds, and NatWest.
Raja and Greenwood have indicated that the moderation of interest rates and their future trajectory could affect lenders' net interest margins, a crucial measure of a bank's profitability from lending activities. "Increased market turbulence could dampen capital markets activity levels while potentially boosting market activity," the analysts further commented.
Speaking to City AM, Greenwood suggested that domestic banks are likely to have corporate clients "that are directly exposed to tariffs".
He added, "Banks are essentially just leveraged plays on the underlying economies in which they operate."
For smaller and mid-cap banks, Raja and Greenwood foresee a lesser impact.
They noted that Arbuthnot Latham, Paragon, and Vanquis are "domestically focused and therefore less at risk from the international trade fallout".
Despite not experiencing losses as significant as their FTSE 100 counterparts, these smaller lenders have not been able to avoid the global sell-off.
Vanquis saw a nearly five per cent drop at midday, while Paragon fell by 1.5 per cent and Arbuthnot dipped by 0.59 per cent.
