Markets rose on Thursday after Credit Suisse agreed a late night deal for $54bn (£45bn, €51bn) of extra funding with Switzerland’s central bank.
Credit Suisse, which is one of the world’s largest wealth managers as well as an investment bank, saw its shares plunge over 30% yesterday as insolvency rumours spread.
The bank warned it had identified ‘weakness’ in its balance sheet and has put out a series of poor results updates of late. This all followed huge losses in 2021 stemming from its relationship with failed American hedge fund Archegos.
The fears over it collapsing prompted a big sell-off across the market yesterday, with banks hit the hardest. Nerves have now been calmed though after the Swiss National Bank stepped in to offer a backstop.
Investors appear to be convinced Credit Suisse is back on safe ground, with shares in the bank surging 24% in morning trading on Thursday.
Victoria Scholar, head of investment at Interactive Investor, said: “[Credit Suisse] has has been undergoing a major restructuring, slashing thousands of jobs, shrinking its investment bank and focusing more on wealth management but this has done little to assuage the bears. The events of this week catalysed another major sell-off in the stock, raising concerns about the existential future of the bank, causing a painful ripple effect across broader markets.
“Thankfully, there appears to be a lifeline for the beleaguered lender, which should prevent another Lehman moment, much to the relief of markets and Credit Suisse’s investors. The bank which has been around since 1856 has been instrumental in supporting growth of the Swiss economy with the SNB clearly judging that the bank’s systemic important overrides any moral hazard argument.”
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