European shares dented by drop in Swiss bank stocks

A drop in the shares of Swiss banks Credit Suisse and UBS weighed on European equities this morning, stalling the advance of a major regional index to near 6-year highs.

The pan-European FTSEurofirst 300 index was down by 0.3 per cent at 1,347.59 points in mid-session trading, retreating after a strong run in February which had taken it close to its highest level since May 2008.

The euro zone’s blue-chip Euro STOXX 50 index also slipped 0.1 per cent to 3,153.89 points.

Credit Suisse fell 2.1 per cent while rival UBS weakened by 1 per cent, with both companies taking the most points off the FTSEurofirst 300 index, after fresh signs of pressure on the Swiss banking industry from U.S authorities.

The pan-European STOXX Europe 600 Bank Index also declined by 0.4 per cent.

A US Senate subcommittee yesterday alleged new misdeeds by Credit Suisse and accused the US Justice Department of dragging its feet.

Credit Suisse officials are expected to stress that only a small group of Swiss-based private bankers had helped clients evade taxes and that it was not a widespread practice, according to a person familiar with the bank’s thinking.

The Justice Department is probing 14 Swiss banks five years after UBS, Switzerland’s largest, admitted to helping US taxpayers hide money from tax officials, and agreed to provide client information.

“For Credit Suisse, it’s just one more problem they have to deal with,” said Ion-Marc Valahu, fund manager at Geneva-based firm Clairinvest.

While Swiss banks have come under pressure in the United States, many fund managers are betting on Italian and Spanish banks outperforming as their countries’ economies slowly recover.

Reuters