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European banking stocks were hammered Thursday as investors continued to question lenders' profitability and balance-sheet strength.

Bank stocks on the Stoxx Europe 600 were down 5.9% amid a broader selloff in European equities, taking year-to-date losses for the sector to 28%.

Banking equities have suffered a turbulent start to the year amid investor concerns about lenders' capital buffers and ability to navigate volatile markets. The selloff has prompted concerns that the instability could spread to the broader economy.

Shares in Socié té Gé né rale SA fell 14% Thursday after the French bank warned it may fall short of its profitability target this year. In Switzerland, Credit Suisse Group AG shares dropped 7.7% and UBS AG slumped 8%.

Italian lenders were hit hardest Thursday. Unione di Banche Italiane SpA fell 17% after reporting lower-than-expected earnings, while Mediobanca SpA shares fell 9.6% and UniCredit SpA stocks slumped 7.4%. Trading was suspended in shares of all three.

Deutsche Bank AG, whose recent falls helped trigger the carnage, was down 6.8%, reversing some of Wednesday's rally.

Greek banks continued their sharp falls, with Eurobank Ergasias SA down 26%.

The origins of the rout are varied, but a major reason cited is that as central banks usher in negative interest-rate policies banks will struggle to make money.

"We're revising down expectations for rates, which will put down pressure on net interest margins," said Bo Christensen, an analyst at Danske Invest.

Analysts said banks were also being pressured by falls in the price of oil and the selloff on the U.S. high-yield debt market. On Thursday, the price of Brent oil, the international benchmark, was down 1.2%, having fallen 18% this year.

"Markets are finding it very hard to find a bottom in the price of oil, and very hard to find a bottom for U.S. high yield debt," pressuring the banking system, Mr. Christensen said.

Liam Moloney and Riva Gold contributed to this article.

Write to Alistair MacDonald at alistair.macdonald@wsj.com

(END) Dow Jones Newswires

February 11, 2016 06:15 ET (11:15 GMT)

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