Major Swiss bank: Credit Suisse shares collapse again

Frankfurt The problems in the banking sector do not stop. Despite various aid measures, investors continue to sell shares in weakened institutions on a large scale.

In Europe, Credit Suisse shares came under massive pressure again, even though the Swiss central bank granted the institute an extensive liquidity commitment. In the US, First Republic Bank again fell significantly in value, despite a stimulus package from a number of large Wall Street banks.

The trigger for the bank quake was the collapse of three smaller US banks within a few days. The turmoil also spilled over into European banking stocks, most notably Credit Suisse, already weakened by a long string of scandals. On Friday, the shares of the second largest Swiss bank fell by around nine percent by the afternoon.

The situation remains tense, explained Daniel Bosshard, an analyst at the Luzerner Kantonalbank. “The basic problem of Credit Suisse remains the lack of customer trust.” The financial market supervisory authority Finma and the Swiss National Bank (SNB) have confirmed that the institute has sufficient capital and liquidity. “But the markets don’t really seem to trust it.”

According to an insider, the bank supervisors of the ECB came to the conclusion at a special meeting that the stability of the sector in the euro zone was not affected after the recent turmoil. In addition, the supervisors were informed that the banks’ exposure to Credit Suisse was immaterial, the insider said. The European Central Bank (ECB) declined to comment.

Credit Suisse shares then accelerated their descent. In the Dax, Comemrzbank and Deutsche Bank were again among the weakest with losses of between 4.5 and six percent.

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With a minus of 27 percent so far, Credit Suisse is heading for the biggest weekly price decline since the 2008 financial crisis. The news on Friday that DBRS Morningstar downgraded Credit Suisse’s credit rating as the first global rating agency following the Swiss central bank’s bailout caused new uncertainty.

It should now be decisive how the bank’s customers behave. “Whether depositors are sufficiently reassured to stem outflows over the next few days is a key question, in our view,” said Frédérique Carrier, head of investment strategy at RBC Wealth Management.

Investors withdraw money from Credit Suisse funds

It was also announced that private and professional investors withdrew hundreds of millions of dollars from more than 300 Credit Suisse funds managed in the USA and Europe in the first half of the week. From March 13 through March 15, outflows totaled more than $450 million, Morningstar Direct reported on Friday.

>> Read here: You can read the latest news on the banking crisis in our news blog

With a total of over 50,000 employees, Credit Suisse is one of the world’s largest asset managers. Confidence in the stability of the institute is crucial for business success. After years of failures and scandals, however, this trust has recently eroded. In the fourth quarter alone, investors withdrew over CHF 110 billion.

In the meantime, the outflows have subsided significantly. However, with the uncertainty surrounding Silicon Valley Bank in California, uncertainty spread again. In order to be able to implement possible withdrawal orders from customers, Credit Suisse is now tapping into the SNB funds in tranches. If these measures do not lead to stabilization soon, experts consider state aid or a takeover to be possible next steps.

First Republic Bank stock plummets again

In the USA, too, it is evident that investor confidence in the banking sector is far from restored. Shares in First Republic Bank slipped more than 20 percent after the ailing regional bank received a stimulus package. “Perhaps the market is waiting for a full sale rather than a capital injection,” said John Petrides, portfolio manager at Tocqueville Asset Management.

A total of eleven major US banks such as JP Morgan and Citigroup have invested $30 billion in the smaller financial institution. However, the analysts at JP Morgan write that investors are unsure whether the aid is sufficient to save the First Republic. They also questioned the profitability of the bank.

>> Read here: Big US banks are helping the ailing First Republic Bank

The Wall Street banks that helped bail out the San Francisco-based bank also took a hit, with JP Morgan, Citigroup, Bank of America and Wells Fargo all falling between 3% and 4%. The industry index S&P Banks lost around four percent, as did the “KBW Regional Banking Index”.

On Friday a week ago, the Californian banking regulator closed Silicon Valley Bank, and the institute was placed under the US deposit insurance fund FDIC. It is the biggest bankruptcy in the US financial sector since Washington Mutual in the financial crisis of 2008. The small Signature Bank followed a little later. Previously, the crypto bank Silvergate had to give up.

Now the former parent company of Silicon Valley Bank, SVB Financial, is taking refuge in bankruptcy proceedings. The proceedings initiated under Chapter 11 of the US bankruptcy law should pave the way for a sale of the remaining holdings, as SVB Financial announced on Friday.

Analyst Jochen Stanzl from broker CMC Markets does not expect the banking turbulence to end quickly: “In the long term, the question arises as to how solvent the small and medium-sized banks in the USA in particular really are in the long term. Because liquidity alone does not restore solvency.”

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