Credit Suisse collapsed on the stock market and its shares plunged into the abyss, but today it is recovering all the gap by driving the banking sector.
As was to be expected, the crisis in the US banking sector has repercussions in Europe as well, and so yesterday Credit Suisse’s stock lost 24%, a value that was completely recovered today.
Credit Suisse has been in difficulty for some time
As pointed out in a recent article, the Swiss bank’s crisis started long ago.
The crisis in the US banking sector with the failure of 4 banks this week alone and the sudden intervention of the Fed and government to patch it up is spreading.
The contagion touches, as was inevitable, neighboring Europe, which has solid and long-standing relations with the States, and of course it touches Credit Suisse.
However, the Swiss bank’s crisis has reasons exogenous to the current situation, which only contributes to exacerbating the stock market losses.
The Credit Default Swap is the main instrument that provides the indicator whether a bank is solvent or not, and at the end of September, it was showing European giants such as Deutsche Bank, Barclays, Intesa Sanpaolo and “our” Credit Suisse in deep crisis.
Solvency was a major issue at Credit Suisse last year
Insurance companies last year quintupled prices related to default risk for the transalpine bank.
From what came out in a Financial Times article last year, Swiss executives spend part of their day reassuring investors from the risk of default.
Indeed, the bank would need corporate restructuring and new liquidity that could avert the worst.
Crisis and high volatility for the banking sector
Credit Suisse (-24% yesterday), secures solvency and liquidity thanks to interventions by the Swiss National Bank and the idea of corporate reorganization taking shape.
The above news is enough to calm market and investors who are enjoying the portentous stock market recovery of equal magnitude compared to yesterday’s debacle (24%).
Thanks to the intervention of the Swiss government and the central bank, the stock recovers and is back above 2 francs.
The bank becomes market maker and drags other lenders Ubs (+4.5%), Santander (+3.6%), Deutsche Bank (+2.9%), Barclays (+3.5%) and Unicredit (+3%).
The Stoxx600 index is up 2.6%, but all banks are benefiting from Credit Suisse’s positive day with recoveries ranging from 2% to 4%.
Rbc Capital’s Anke Reingen and the Baader Halvea firm agree that confidence is the key to saving the bank and the company’s stock on the stock market.
For Equita Sim, the Swiss National Bank with the mega liquidity injection aimed at buffering market bellyaches and securing the institution have absorbed their effect and it is:
“substantial if compared to the level of liquidity declared by the bank as of March 14 (LCR = 150%) and to the total amount of deposits (233 billion Swiss francs) and is reasonably aimed at guaranteeing customers on the institution’s capacity to honor its commitments, avoiding a liquidity crisis that could arise in the event of outflows of deposits.”
Furthermore, Equita Sim continues:
“We believe that the liquidity injection could be a short-term support measure, but it will hardly be sufficient to guarantee a solution to the bank’s problems (market confidence in the strategy/brand, complex restructuring) on which more measures are needed ‘ incisive”. “The liquidity line provided by SNB should reassure investors on the solvency of Credit Suisse which as of March 14th had further strengthened the Liquidity coverage ratio (LCR) from 144% at the end of 2022 to 150% – observe from Intermonte – We believe that the situation remains complex: the ECB has asked European banks for exposure to Credit Suisse, we believe that UBS could intervene in a rescue operation.”