LONDON/ZURICH, March 17 (Reuters) – Shares in Credit Suisse (CSGN.S) resumed their decline on Friday as investor sentiment remained fragile following a $54 billion bailout the Swiss bank secured this week.
A rating downgrade and a US lawsuit on Thursday offset some of the relief that came from the emergency liquidity line offered by the Swiss central bank on Thursday.
Credit Suisse shares lost another 8% on Friday after two days of sharp swings, helping the stock regain 20% on Thursday after falling 24% on Wednesday, when its largest investor said it would not be able to sell its stake under regulation. raise to capital injection.
“Whether savers are sufficiently reassured to contain outflows in the coming days is, in our view, an important question,” said Frédérique Carrier, head of investment strategy at RBC Wealth Management.
While markets are relieved that the Swiss central bank has intervened, sentiment will remain very fragile, especially as investors are likely to worry about the ultimate economic impact of an aggressive tightening of monetary policy by the European Central Bank (ECB). ),” she added.
Credit Suisse has seen net outflows of more than $200 million from its US and European-managed funds since March 13, the Morningstar Direct said Friday.
DBRS Morningstar on Thursday became the first global rating agency to downgrade the bank’s credit rating, downgrading it to “BBB,” which is still an investment grade.
The head of Credit Suisse’s Swiss arm said late Thursday that the new financing would allow the bank to continue its turnaround plan, although it may take time to regain customer confidence.
“We’re still a little cautious here, but there’s certainly more positive news on Credit Suisse,” said John Milroy, an investment advisor at Ord Minnett.
In a further sign that concerns about banking stress remain high, the ECB’s Supervisory Board convened an unscheduled meeting on Friday to discuss stress and vulnerabilities in the eurozone banking sector.
ECB regulators were told that deposits in eurozone banks remained stable and exposure to Credit Suisse was irrelevant, a source familiar with the contents of the meeting told Reuters.
Credit Suisse became the first major world bank to raise a lifeline since the 2008 financial crisis, raising doubts over whether central banks will be able to push aggressive rate hikes to curb inflation.
The ECB pressed ahead with a 50 basis point rate hike on Thursday as it prioritized bringing inflation back, currently at 8.5%, to its target of 2%. The central bank said eurozone banks are in better shape than they were in 2008.
A $30 billion lifeline for US-based First Republic Bank (FRC.N) on Thursday also failed to reassure the market as investors remained concerned about cracks in the sector following the collapse of two other mid-sized US lenders in the past week. Shares in First Republic fell 27.5% on Friday.
Credit Suisse shares had their worst week since the start of the COVID 19 lockdown in March 2020, losing 25.5%.
The feverish state of the markets was underlined by European bank stocks (.SX7P) falling nearly 3% on Friday and heavy weekly losses – down nearly 12% in their biggest weekly decline in a year.
The banking sector is in turmoil after the bankruptcy of the American Silicon Valley Bank (SVB) last week.
US shareholders of Credit Suisse took the bank to court on Thursday, alleging that the bank defrauded them by hiding financial problems. Credit Suisse declined to comment on the lawsuit.
Swiss lawmakers on Friday vowed to hold those responsible for Credit Suisse’s troubles accountable and urged Credit Suisse to put its house in order after years of scandal as they sought to contain the crisis and avoid any reputational damage to the country to limit.
($1 = 0.9259 Swiss Francs)
Reporting by Joice Alves in London and Alexandra Hudson in Zurich; written by Dhara Ranasinghe and Joice Alves, edited by Jason Neely and Elaine Hardcastle
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