Credit Suisse and European bank stocks tumbling: How bad is it?
Credit Suisse and a host of other European stocks have all suffered significant falls in Tuesday morning trading.
The embattled Zurich lender took a blow after the chair of the Saudi National Bank, its largest shareholder, said he would not put additional capital in the firm if required.
That built on further concerns in the light of Silicon Valley Bank’s fall last week that banks across the world could be over-exposed to rising interest rates in their bond portfolios.
So how bad is it?
Analysts have weighed in – with one saying the bank is simply “too big to fail.”
Neil Wilson, Chief Market Analyst at Finalto:
“It looks like there are increasingly worried investors and counterparties looking at Credit Suisse as potentially being the next shoe to drop (after SVB).
“If CS were to run into serious existential trouble, we are in a whole other world of pain. It really is too big to fail. Not sure ECB can go ahead with 50bps tomorrow in this febrile kind of environment.”
Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown: It’s a “hot messin Europe”
“The fresh banking sell-off has taken hold as fears rise to the surface about the robustness of sector with the shadow of the SVB collapse still looming large. With the US banking sector downgraded to negative by Moody’s nervousness is super-high and that’s spilt over into a hot mess in Europe.
“The calm that descended amid expectations that the Fed may press pause on rate hikes to restore financial stability has evaporated. It seems investors have been rattled by worries that the ECB may still opt for a big rate increase, despite the problems hard and fast monetary policy tightening has had on bond prices.
A game of whack a mole seems to be emerging, and problems are popping up elsewhere in the world.
“The worry is that banks sitting on large unrealised losses in their bond portfolios might not have sufficient buffers if there is a fast withdrawal of deposits. Although the biggest players are judged not to be at risk, thanks to the chunky layer of capital they are sitting on and the stable nature of their deposits, the nervousness is palpable.
Naeem Aslam, Chief Investment Officer, Zaye Capital Markets:
“There are a number of concerns here; firstly, traders are worried if Credit Suisse will be able to survive given that its stock has fallen below the two-handle level today, and if it doesn’t, how big the crisis is going to be. Secondly, the issue of tightening the monetary policy has made traders worried in Europe as well, while many still believe that the ECB is going to do what it does best, which is to chase the curve.”
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