European stocks closed in negative territory Tuesday as bank shares came under pressure, leading the way lower.
The Stoxx Europe 600 /zigman2/quotes/210599654/delayed XX:SXXP +0.90% fell 1.3% to end at 335.47.
Banks: Among banks, shares of Commerzbank AG /zigman2/quotes/200193353/delayed DE:CBK +0.85% sank 9.2% as the German lender warned it won’t hit its target of stable net profit for the full year. Revenue and net profit fell in the second quarter, hurt by negative interest rates and lackluster client activity.
Meanwhile, Italy’s Banca Monte dei Paschi di Siena /zigman2/quotes/202470451/delayed IT:BMPS -1.43% lost 16%. The shares had rallied during Monday’s session after the bank’s board late Friday approved a privately backed rescue plan for nonperforming loans at the embattled bank.
But BMPS still fared the worst among the 51 banks in the European Banking Authority’s stress tests, released late Friday. The Italian banking sector was highlighted as one of the weaker spots in Europe’s financial landscape.
Italian Prime Minister Matteo Renzi on CNBC on Tuesday acknowledged problems at BMPS, the world’s oldest lender, but said his overall view “is that Italian banks are good.”
Italian bank shares remained under pressure. UniCredit SpA /zigman2/quotes/200769686/delayed IT:UCG +1.07% dropped 7.2% on Tuesday after a suspension in trading, while Intesa Sanpaolo SpA /zigman2/quotes/206161760/delayed IT:ISP +0.90% shed 3.8%.
Meanwhile, shares in Deutsche Bank AG /zigman2/quotes/205584254/delayed DE:DBK +1.58% and Credit Suisse Group AG /zigman2/quotes/205269278/delayed CH:CSGN +1.00% /zigman2/quotes/202835784/composite CS +0.84% fell 4.8% and 6.2%, respectively, as the stocks face deletion from the Euro Stoxx 50 /zigman2/quotes/210599266/delayed XX:SX5P +0.89% on Aug. 8. Deutsche Bank shares have dropped 50% this year, and Credit Suisse is down nearly 49%.
In the U.K., shares in Barclays PLC /zigman2/quotes/208409333/delayed UK:BARC +2.46% /zigman2/quotes/206581728/composite BCS +2.24% and Royal Bank of Scotland PLC dropped 3.6% and 1.8%, respectively. A U.K. regulator, the Financial Conduct Authority, has proposed a longer deadline before banks no longer have to pay customers compensation for missold Payment Protection Insurance.
“Every time that deadline gets stretched out, that’s just a prolonged headwind that keeps hanging around for the banks,” said Japer Lawler, a market analyst at CMC Markets.
Other movers: Also among the worst performing on the Stoxx 600, Rotork PLC /zigman2/quotes/200372942/delayed UK:ROR +1.01% shares slid 8% after the maker of industrial valve maker said it foresees lower margins in 2016. Its first-half net profit dropped 32% as low oil prices continued to delay projects and as geopolitical tensions hurt certain markets.
Equity gainers were led by Direct Line Insurance Group PLC /zigman2/quotes/201952264/delayed UK:DLG -0.40% , which gained 13% after the insurer said it plans a special dividend payment despite a decline in first-half pretax profit.
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National indexes: Germany’s DAX 30 /zigman2/quotes/210597999/delayed DX:DAX +1.34% dropped 1.8% to 10,144.34.
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.1253% was higher, at $1.1225 from $1.1169 late Monday.