Adelaide Bank shares fell by 7% yesterday as investors pushed the shares down on rumours of troubles related to the US credit squeeze. Investors dumped Adelaide shares on concerns about the bank's exposure to the tightening of the US debt markets.
Compared to other Australian banks, Adelaide Bank is a big borrower from the US debt markets. Rumours that the bank sought assistance from the Reserve Bank were denied by both the Adelaide Bank and the RBA.
Much of the uncertainty with lenders has not been helped by the collapse of British lender Northern Rock, where customers have caused a run on deposits, withdrawing over £2 billion. Northern Rock's share price has since taken a battering.
Despite no rise in official interest rates, Adelaide Bank has increased some of its home loan rates by 0.3 of a percent. Last week, the ANZ became the first of the big banks to lift its variable rate by 0.05 percent. If the tightening of global credit continues, other banks may follow suit.
The bank is currently in negotiations to be bought out by Bendigo bank in a share deal worth almost $2 billion. Bendigo Bank's shares fell 77 cents to $13.34. Falls occurred across the banking sector with all the major banks lower in the day's trade.