By Geoffrey Smith
Investing.com - “Money doesn’t stink,” is one of the oldest principles in business. The first-century Roman emperor Vespasian first coined the phrase to defend raising taxes on the urine extracted from Rome’s sewers.
But the idea that money isn’t tainted by its origins is one that Europe’s banks have taken too closely to heart in the past, and they are suffering for it now in a big way.
Switzerland’s UBS (SIX:UBSG) is down 2% this morning after a French court fined it 4.5 billion euros ($5 billion) for helping its clients avoid taxes, a sum that will swallow around 80% of last year’s pretax profit.
Meanwhile, Sweden’s Swedbank (ST:SWEDa) is down another 8.2% - after losing 15% on Wednesday on allegations linking it to Danske Bank's (CO:DANSKE) funnelling of illicit funds out of the former Soviet Union. Broadcaster SVT said the bank was linked to $5.8 billion of questionable transactions, including some linked to the case involving Sergey Magnitsky, the lawyer who died in prison after helping to expose money-laundering by Russian officials.
Swedbank’s Scandinavian rival Nordea (HE:NDAFI) and Deutsche Bank (DE:DBKGn) are also under pressure. Arguably the only thing that smells worse this morning is the lingering whiff of Juventus' (MI:JUVE) defending in the Champions League defeat in Madrid last night. Its shares are down 8%.
Despite all that, the Stoxx 600 index was down only 0.2% at 370.80 by 05:00 AM ET (1000 GMT). That’s because flash readings of IHS Markit’s purchasing managers indexes suggest the euro zone economy may be bottoming out in February – even if it’s still on course for only 0.1% growth in the first quarter.
Swedbank's CEO Birgitte Bonnesen acknowledged "there is a risk" that some payments could have gone unnoticed by its internal controls, but said she "does not recognize" the scale of the payments alleged by SVT. UBS meanwhile has said it will appeal the French fine. But it will be some time before any of the banks involved can hope to draw a line under the affairs.
Of course, when they finally do, they’ll find shareholders are a forgiving bunch after all. The U.K.’s Standard Chartered (LON:STAN) is up 0.2% Thursday morning after setting aside ‘only’ $900 million to settle allegations of violating U.S. sanctions on Iran and manipulating foreign exchange rates.