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Questions grow over banks as profit warnings pile up

PARIS — Questions are growing over the financial health of banks, particularly in Europe and the United States, as they face a toxic mix of low economic growth, bad loans, and squeezed earnings.

On Thursday, France’s Societe Generale became the latest bank to issue a confidence-shattering profit warning, which helped trigger a new sell-off in financial stocks. The bank saw its share price stumble 12 percent and major rivals like Deutsche Bank and UniCredit saw losses of nearly 10 percent.

European banks are not the only ones to suffer. Japanese bank Mitsubishi Financial fell 7 percent on Thursday. In the United States, Morgan Stanley, Citigroup, and Bank of America are down more than 30 percent so far this year.

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Among the top concerns is that the global economy will weaken more than expected, souring some of the loans that banks have issued to companies around the world — particularly in distressed sectors like the energy industry.

US banks have tens of billions of exposure to loans made to energy companies, who have found themselves unable to pay back their debts due to low energy prices.

Mike van Dulken, head of research at Accendo Markets, says the latest weakness in bank stocks stems from US Federal Reserve chairwoman Janet Yellen ‘‘warning on current financial market turbulence and suggesting further rate hikes could be delayed, which added to already raised anxiety about the health of the global economy.’’

On Wednesday, Yellen cautioned that global weakness and falling financial markets could depress the US economy’s growth and slow the pace of Fed interest rate hikes. That’s a particular concern as the US economy has been one of the few bright spots in the global economy, which is seeing a slowdown in China and stagnation in Japan and Europe.

The slowing of interest rate increases in the United States is also bad news for the big banks, which have been waiting for interest rates to rise. Since the financial crisis, the big banks have largely grown profits by cutting costs. Higher interest rates would mean banks could charge more for their loans.

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The fact that many central banks keep cutting interest rates, pushing down market lending rates, is further hurting banks by squeezing their profits. Banks mainly make money by lending, so as rates drop, so do earnings. Investors made big bets in the second half of last year that interest rates would rise in the United States, so to see that bet fail has forced investors to dump bank shares.

The situation is worsened in some regions, particularly the eurozone and Japan, where the central banks charge commercial banks to deposit money with them.

Analysts at Capital Economics say that if the European Central Bank cuts one of its key interest rates further below zero, ‘‘this could have adverse effects on banks’ profitability.’’

Citing ECB chief Mario Draghi’s recent statements that the central bank could take more action in March, the analysts said the ECB ‘‘seems prepared to squeeze banks’ profitability further in the short term in order to support the economy.’’

In some markets, bad loans are already piling up — or have not been dealt with effectively since the global financial crisis.

The Stoxx index of European bank shares is down 20 percent in the last month, when Draghi first mentioned the chance that the ECB might try to offer more stimulus in March to lower market rates.

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