Credit Suisse crisis: European stock markets plummet, new bank exits

European stock markets ended a tough week with a sharp drop on Friday as fears refocused on the banking sector, despite various attempts to calm investors. European institutions are “extremely solid,” the Governor of the Bank of France had scored hours earlier.

Milan fell by 1.64%, Paris by 1.43%, Frankfurt by 1.33%, London by 1.01%, all these financial centers lost more than 4% in a week. Once again, the banking sector was hit hard, in particular Credit Suisse, which lost a quarter of the market value of shares in one week. Shares of Credit Suisse even fell 8.01% at the start of the stock market weekend. Shares rebounded the day before, but fell again on Friday, dropping 8.01% to CHF 1.86. Analysts note that Credit Suisse has problems not with liquidity, but rather with profitability.

What is the future of Credit Suisse?

On Wednesday, the president of the National Bank of Saudi Arabia, Credit Suisse’s largest shareholder, said the bank had “absolutely no” intentions to increase its stake in Credit Suisse, sparking a panic in a market very concerned about the situation. risks of infection after the bankruptcy of the American bank SVB. Shares of Credit Suisse lost up to 30% during the session, prompting the Swiss central bank to come to the rescue by providing Credit Suisse up to 50 billion francs (50.7 billion euros) in cash.

This lifeline raises questions about organized bankruptcy, in which the regulator will assume control of the bank and assume responsibility for its liquidation. It’s a “fancy” hypothesis, David Benamu, investment director at Axiom Alternative Investments, told AFP.

Credit Suisse, one of the world’s 30 too-big-to-fail banks, is “one of the best-capitalized banks in Europe,” he recalled. Its core capital ratio, the amounts banks must set aside for a crisis, is 14.1%, and the bank now has massive liquidity with the help of the central bank.

Merger with UBS?

Among the options being considered, JP Morgan analysts mention a takeover by another bank, “with UBS as a potential option.” Given the weight this merger will give to the two banks, they suggest that Credit Suisse’s Swiss subsidiary, which does retail banking and SME loans, could be listed on the stock exchange or split.

Contacted by AFP, neither UBS nor Credit Suisse declined to comment.