Worries About Japanese Banks Hit U.S. Banking Sector

Concerns about weakness in Asian and European banks hit the U.S. bank sector this morning.

International rating agency Fitch set the tone when it placed individual ratings of 19 Japanese banks under negative review. Fitch said the action was a "response to growing concern over the impact of falling share prices and lingering asset quality problems on the banks' capital quality performance and prospects."

Fitch said that while many of the problems had been facing the banks for years, "the situation is being exacerbated by the falling stock market." The ratings review included Bank of Tokyo Mitsubishi and Mizuho Holdings, the latter of which is said to be the world's biggest banking group.

Goldman Sachs took a cautious view of the European banking sector, saying it is "battening down the hatches on German banks," adjusting its forecasts for 2001 broadly lower on Deutsche Bank, Dresdner and Commerzbank. Dresdner's 2001 estimates were slashed by 31%.

Elsewhere throughout the banking sector, Goldman said every European bank benefited from the "roaring bull market in 2000," and that a more conservative view is in order for the year ahead. Goldman also noted worries at HSBC (HBC), where "broad based 4Q disappointment triggered more caution." Investors have lately expressed caution about the London-based outfit's exposure to Asian markets.

U.S. financials tumbled at the open but were lately trying to fight off the selling pressure with the American Stock Exchange Broker/Dealer Index down 1.9% and the Philadelphia Stock Exchange/ KBW Banks Index losing 3.4%.

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