What's going on?

It wasn�t a good day to be a European bank as a slew of weak earnings were released � and the weakness helped drag down stocks across Europe (most stock markets were down by about 2%).

What does this mean?

The Swiss bank UBS was one of the worst hit as it reported profits that were about half what they were one year ago. It was a similar story for Commerzbank, the large German bank. For one, the low interest rates mean that banks can�t charge their clients very much to borrow money from them � and that hurts profits.

The stock of HSBC, which is listed on the London stock exchange, briefly went up as it actually made more profit than investors were expecting. But that wasn�t enough to quell fears that the bank might have to cut its dividend (the cash it pays out to investors). French bank BNP Paribas appeared to do the best of the bunch as its profit actually went up versus the same period last year � but its share price still fell.

Why should I care?

For markets: An optimist might just be able to find a silver lining. It�s tough to find positives on a day when the likes of UBS and Commerzbank see their stocks sell off almost 10%, but decent results from HSBC and BNP are at least moderately encouraging. Barclays and Deutsche Bank also recently reported better-than-expected results. However, considering the stock prices, investors don�t seem to believe in a recovery for the European banking sector.

The bigger picture: Italy might be the real problem. A few weeks ago, we reported on the bailout fund setup by a number of Italy�s largest banks to help out weaker banks. On Tuesday, the first of those weaker banks tried to raise cash from investors � but hardly anyone wanted to invest in them. So the bailout fund stepped in � and more than 1/3 of the fund was used to buy shares in that single bank. More money for the bailout fund is probably needed � and it�s not clear that it will be forthcoming.