Credit Suisse crisis: European stock markets in sharp decline, new dropout of banks

European stock markets ended a tough week in sharp decline on Friday, with fears once again focusing on the banking sector despite various attempts to reassure investors. European establishments are “extremely solid” hammered a few hours earlier the Governor of the Banque de France.

Milan fell by 1.64%, Paris by 1.43%, Frankfurt by 1.33%, London by 1.01%, all these financial centers losing more than 4% over the week. The banking sector was once again strongly affected, in particular Credit Suisse which lost a quarter of its stock market value in one week. Credit Suisse shares even closed down 8.01% at the start of the stock market weekend. The title had rebounded the day before but fell again on Friday to close down 8.01% at 1.86 Swiss francs, analysts pointing out that Credit Suisse did not have a liquidity problem but rather profitability.

What future for Credit Suisse?

On Wednesday, the president of the Saudi National Bank, the largest shareholder of Credit Suisse, said that the bank had “absolutely no” intention to increase its stake in Credit Suisse, which had triggered a movement of panic in a market very worried about the risks of contagion after the bankruptcy of the American bank SVB. The title of Credit Suisse had lost up to 30% during the session, pushing the Swiss central bank to come to the rescue by making available to Credit Suisse up to 50 billion francs (50.7 billion euros) of cash.

This lifeline raises questions about an orderly bankruptcy, in which the regulator would take control of the bank and take charge of dismantling it. It is a “fanciful” hypothesis, reacted David Benamou, investment director of Axiom Alternative Investments, during an interview with AFP.

Credit Suisse, one of the thirty banks globally too big to fail, is “one of the best capitalized banks in Europe”, he recalled. Its core capital ratio, the sums banks must set aside for shock in the event of a crisis, stands at 14.1% and the bank now has huge liquidity with help from the central bank.

Merger with UBS?

Among the avenues considered, JP Morgan analysts mention a takeover by another bank, “with UBS as a potential option”. Given the weight that this merger would confer on the two banks, they imagine that the Swiss branch of Credit Suisse, which includes retail banking and loans to SMEs, could be listed on the stock market or split up.

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