MILAN/LONDON: European shares closed at their lowest level in more than two years on Monday with investor concerns over the health of the region's banks compounding worries over slowing global growth.
The pan-European FTSEurofirst 300 index closed down 3.4 percent at 1,239.68 points, its lowest since October 2013.
The STOXX Europe 600 banking index fell 5.6 percent, making it the top sectoral faller. The index is down around 24 percent so far this year on concerns about banks' profitability and capital strength in an environment where monetary stimulus continues to put pressure on margins.
Shares in Deutsche Bank fell 9.5 percent, leading decliners on Europe's Stoxx 50 index. Elsewhere in the sector, BNP Paribas, ING Santander and Barclays all fell by more than 5 percent.
"Investors are starting to think that banks are not as solid as previously thought," said Giuseppe Sersale, fund manager at Italy's Anthilia Capital. He added the negative sentiment was compounded by signs of a U.S. economic slowdown, persistent worries about China, and continued volatility in oil prices.
The cost of insuring the European financial sector's senior debt against default climbed to its highest level since late 2013.
Jaisal Pastakia, investment manager at Heartwood Investment Management, said there were mounting concerns that banks' profitability will be squeezed by negative interest rates and prolonged dovish monetary policy.
"Weak investor sentiment has been accentuated by the Bank of Japan's decision to apply negative interest rates on excess reserves, which follows moves already taken by the European Central Bank, Sweden and Denmark."
Earlier this month, Credit Suisse reported its first full-year loss since 2008 after booking a big impairment charge at its investment banking business, while Deutsche Bank posted a record loss for 2015.
The Athens stock index fell 7.9 percent to its lowest level since at least 1991 due to uncertainty that a bailout review by the country's lenders could drag on.
"The market is pricing in financial and political instability and delays in the review," said Manos Hatzidakis, an analyst at Beta Securities.
Energy stocks also lost ground, with the European oil and gas index felling 2.8 percent after crude oil prices slipped again as supply overhang concerns grew.
Other European sectors sensitive to macroeconomic activities, such as autos, media, construction and technology, all fell by more than 4 percent.
"It's a difficult market environment. I would have hoped for a rebound in the market but after the last week's actions, this is certainly off the table. The economic newsflow has to improve. So far it hasn't on a decisive scale," Gerhard Schwarz, head of equity strategy at Baader Bank in Munich, said.
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