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Why Shares of Barclays, Deutsche Bank, and HDFC Bank All Shot Higher Today

By Eric Volkman – Updated Apr 29, 2020 at 6:06PM

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A regulator and a clutch of results drove the bulls headlong into the global banking sector.

What happened

Several international bank stocks rose by double-digit percentages on the day, particularly European lenders Barclays (BCS -1.24%) and Deutsche Bank (DB -0.80%), which closed a respective 13% and 12% higher. Meanwhile, India's HDFC Bank (HDB 2.76%) added 10%. 

Facade reading "bank" on a building in a city.

Image source: Getty Images.

So what

European banks will benefit from the European Union's (EU) decision, handed down on Tuesday, to enact a package of temporary "capital relief" measures for the economic bloc's lenders.

Chief among these is a relaxation of banks' leverage ratio, the amount of capital they are required to park at central banks. This will free more money for loans to capital-starved European companies.

Also, both Deutsche Bank and Barclays reported their Q1 fiscal 2020 results. Typically loss-making Deutsche Bank squeezed out a net profit, in spite of the heavier provisioning that's the norm for banks these days. Barclays was a surprise overachiever; the formerly leaden British bank posted impressive gains in securities trading.

Top Indian lender HDFC had no spectacular news to report. It seems investors lifted it higher on general optimism for resilient global banks; in its most recently reported quarter, HDFC managed to raise its net profit an impressive 18% year over year.

Now what

So far, all the banks mentioned here seem to be weathering the coronavirus crisis well. The EU's move will certainly help lenders on that continent. But the world's banks are far from being out of the woods, so investors should temper today's burst of optimism with more than a dollop of caution.

 

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends HDFC Bank. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Barclays PLC Stock Quote
Barclays PLC
BCS
$6.40 (-1.24%) $0.08
Deutsche Bank Stock Quote
Deutsche Bank
DB
$7.40 (-0.80%) $0.06
HDFC Bank Limited Stock Quote
HDFC Bank Limited
HDB
$58.42 (2.76%) $1.57

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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