Credit Suisse shares fell over 10% in Europe’s morning session after the Financial Times reported that the Swiss bank’s leaders are meeting with its biggest investors to reassure them about the Swiss lender’s financial health.
Spreads on the bank’s credit default swaps (CDS), which protect investors from financial risks such as default, increased substantially on Friday.
They came after rumours that the Swiss lender was attempting to raise cash, citing a message from its CEO Ulrich Koerner.
Year to date, the stock is down around 60%.
“I believe you are not conflating our daily stock price performance with the bank’s robust capital foundation and liquidity position,” the CEO added in a separate employee message acquired by CNBC.
According to the Financial Times, the executive denied reports that Credit Suisse had formally approached its investors about possibly raising more capital, insisting that Credit Suisse “was trying to avoid such a move with its share price at record lows and higher borrowing costs due to rating downgrades.”
The bank informed Reuters that it is reviewing its strategy, which may entail asset sales and divestitures.
According to Reuters, Credit Suisse has been in negotiations with investors to raise capital with multiple eventualities in mind, including the possibility of the bank “mostly” exiting the US market.
According to John Vail, chief global strategist at Nikko Asset Management, on CNBC’s “Squawk Box Asia” on Monday, the news from Credit Suisse implies a “rocky moment” ahead, but it might lead to a change in the direction of the US Federal Reserve.
The silver lining at the end of this era is that central banks will most likely begin to relax at some point as both inflation and financial conditions worsen drastically,” Vail added. “I don’t believe this is the end of the world.
We struggle to see anything systemic,” Citi analysts stated in a study regarding “a big European bank’s likely “contagion impact” on U.S. banks. Credit Suisse was not mentioned by the analysts.
We appreciate the nature of the worries, but the current position is a night and day difference from 2007, since the balance sheets are fundamentally different in terms of capital and liquidity,” the study added, alluding to the 2007 financial crisis.
We feel US bank equities are highly appealing here,” according to the research.