Credit Suisse shares rebound following £44bn support from Swiss central bank as top shareholder slams ‘unwarranted’ sell off
Credit Suisse’s shares rebounded over 20 per cent on Thursday morning as markets reacted positively to the embattled lender’s announcement that it will tap a CHF50bn (£44bn) liquidity line from the Swiss Central Bank.
Credit Suisse’s shares jumped over 22 per cent in morning trading. The cost of insuring company bonds against default also dropped significantly from yesterday’s close.
Other European banks saw gains. Banco Santander rose 2.5 per cent, Deutsche Bank 1.1 per cent, BNP Paribas 1.9 per cent and UBS 4.2 per cent. The wider Stoxx 600 banking index climbed 0.3 per cent.
In the UK, Barclays was up 3.4 per cent, Lloyds 2.7 per cent and HSBC 2.5 per cent.
The recovery came as Credit Suisse said it may borrow up to CHF50bn (£44bn) from the Swiss National Bank in short term financing.
Late on Wednesday the Swiss National Bank confirmed the embattled lender met “the capital and liquidity requirements” it needed to establish the support. “If necessary, the SNB will provide CS with liquidity,” the statement said.
Credit Suisse issued its early on Thursday morning announcing its intention to “pre-emptively strengthen its liquidity” by tapping the Swiss National Bank’s liquidity line.
“This additional liquidity would support Credit Suisse’s core businesses and clients as Credit Suisse takes the necessary steps to create a simpler and more focused bank built around client needs,” the bank said.
Credit Suisse will also buy back around CHF3bn worth of debt in an attempt to calm markets.
CEO Ulrich Koerner said: “These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders.”
Credit Suisse’s shares plunged yesterday, sparking a wider banking sell-off and fears of global financial instability.
The sell-off was sparked by comments from the chair of the Saudi National Bank, Credit Suisse’s top shareholder, that the bank would not provide further capital to the stricken bank if requested. Ammar Al Khudairy said this was primarily for regulatory reasons.
Today, Al Khudairy said yesterday’s market reaction was “unwarranted”.
Speaking to CNBC this morning, Al Khudairy said “it’s panic, a little bit of panic. I believe completely unwarranted, whether it be for Credit Suisse or for the entire market.”
He also said the Swiss bank had not sought any further assistance since the Saudi National Bank’s initial injection in October.
“There has been no discussions with Credit Suisse about providing assistance,” he said.
“I don’t know where the word ‘assistance’ came from, there has been no discussions whatsoever since October.”
The banking system has been on high alert since the collapse of Silicon Valley Bank last week demonstrated fragility in financial markets.
Eyes will now turn to the European Central Bank, which is meeting today to decide whether to hike rates.
It had all but announced it would hike 50 basis points, but most traders now expect a smaller rate rise of 25 basis points due to the increasingly febrile environment.