Global banking shares took a fresh beating on Wednesday as Credit Suisse shares slid to a new record low as its largest investor said it could not provide the Swiss bank with more financial assistance.
Efforts by regulators and financial executives to ease contagion fears sparked by last week’s collapse of Silicon Valley Bank (SVB) had bought some brief stability to markets, but turmoil once more appeared to be taking over.
Saudi National Bank cannot give more money to Credit Suisse as it cannot go above 10% ownership due to a regulatory issue, SNB’s chairman Ammar Al Khudairy told Reuters.
European banks shares slid over 6%, European stocks were down more 3% and U.S. stock futures pointed to a weak start for Wall Street shares.
MARKET REACTION:
STOCKS: Credit Suisse share trading was halted after heavy losses, last down over 20%, ING Group, ABN AMRO were4 down over 6%.
The euro zone volatility index shot up to its highest level since OctoberBONDS: U.S. and European bond yields fell sharply as investors flocked to safe-haven assets. German 2-year bond yields were down 30 basis points at 2.61%
FOREX: The euro fell almost 1% to $1.0634, the dollar index was up 0.5%.
COMMENTS:
ANTOINE BOUVET, SENIOR RATES STRATEGIST, ING, LONDON:
“The Credit Suisse share price is falling and government bonds are rallying on the back of that. Still very much driven by the perceived health of the banking sector, but this time in Europe.”
CARLO FRANCHINI, HEAD OF INSTITUTIONAL CLIENTS, BANCA IFIGEST, MILAN
“Markets are wild. We move from the problems of American banks to those of European banks, first of all Credit Suisse.”
“This is dragging lower the whole banking sector in Europe. The shares accelerated losses after the Saudis said they’re not willing to support the bank any further.
“I believe Credit Suisse’s crisis can be solved and the bank will not let go belly up. Once some calm returns to the markets, the problem will be who can take it over.”
KASPAR HENSE, SENIOR PORTFOLIO MANAGER, BLUEBAY ASSET MANAGEMENT, LONDON
“So the market is quite confused here on the stability of the bank (Credit Suisse) in general, and certainly doesn’t help if today the Saudis are coming out and saying that they will not increase the buffer, and so we think it will be dependent on the Swiss regulator to step in.
“But in general, the balance sheet is in a much better position, with the European banks all highly regulated. That means they have substantial buffer beyond the equity portion on the senior and subordinated debt.
That should, to some extent prevent an attack, but it didn’t. So, it is important that the European regulator make clear that the underlying systemic risk, not only for deposits, but in the overall European banking market, is rather low.”
(Reporting by the markets and finance team; Compiled by Dhara Ranasinghe, edited by Alun John)
