27 June 2014 by HCM
Depending on the horizon you are choosing, this grapple paints a very different picture. Since the beginning of the year and until recently, financials have been everybody’s darlings. They have had a very good run, particularly after banks were identified as the main beneficiaries of the ECB measures announced early June, and they are the best performers year to date. But recently a string of events have started to take some of their gloss off. First CS (Credit Suisse Group AG) had to settle with the US authorities regarding a tax evasion case and had to pay a fine in excess of $2bln. Then BNP (BNP Paribas SA) was accused of violating US sanctions and could face a $9bln penalty and a ban on certain trading activities. And now BACR (Barclays Plc) is facing embarrassing revelations regarding the way its dark pool was managed. So much so that banks have started to drag financials’ risk premia wider since the beginning of the week. They are the worst performing sector over the last five days, and the iTraxx Financial Senior index which was trading flat to the iTraxx Main index no long ago is now 5bps wider.