Zurich After the Credit Suisse share fell to a new record low on Monday, the price has stabilized again. On Tuesday, the shares of the major Swiss bank increased by six percent and were again above the four franc mark. Nevertheless, investors have significantly expanded their bets on falling prices at Credit Suisse.
This comes from data from the analysis house S3 Partners. Ihor Dusanivsky, managing director of S3 Partners, told Handelsblatt that the volume of bets on a fall in Credit Suisse stock amounted to $350 million after Monday’s sell-off. At the end of September it was still $300 million. Within just one trading day, the volume of short bets increased by more than 16 percent.
At the end of September, the share of outstanding shares held by short sellers was 2.4 percent. This put the bank in the middle of the pack in Europe.
But S3 Parters’ Dusaniwsky warns, “Credit Suisse saw the second-biggest spike in shorting in September, and given recent market volatility, shorting in this stock should continue to increase as traders look to increase exposure.”
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The bank is struggling with increased premiums for credit default insurance, uncertainty about future strategy and speculation on social media about the supposedly critical situation of the bank. These emerged last weekend and contributed to the sell-off at the start of the week.
Very nervous in the markets
Until the new corporate strategy is published at the end of October, nervousness among investors and management is likely to remain high. CEO Ulrich Körner, who has been in office since the end of June, announced that the bank’s cost base would be reduced by around CHF 1.5 billion. However, restructuring initially requires start-up costs. The market environment also remains unfavorable. Therefore, analysts and investors assume that the bank will end 2022 with a loss in the billions.
In the first half of the year, the bank’s loss amounted to CHF 1.6 billion, far more than analysts had expected. The problem: The result could only be partially explained by rising litigation costs or one-off write-offs. The core business, asset management, also came under pressure. In order to deter the short sellers, the new strategy must convince investors.
More: Credit default insurance for Credit Suisse rises in price to a record high – the share slips to a record low.