The banking sector remains volatile as stocks such as Swiss banking giant Credit Suisse (CS) and the American bank First Republic (FRC) experienced wild swings in trading on Thursday. Let’s see how the story of these two banks is rapidly developing.
Credit Suisse’s concerns appear to be easing
Shares of the troubled bank rose higher in morning trade after investors in the bank breathed a sigh of relief following the Swiss National Bank’s announcement of a financial lifeline.
Credit Suisse announced it would borrow $54 billion from the Swiss National Bank and the country’s financial regulator in the form of a secured credit facility and a short-term liquidity facility. The Swiss National Bank stated that CS “meets the capital and liquidity requirements imposed on systemically important banks”.
In addition, CS also offered to repurchase approximately 3 billion Swiss francs of debt relating to 10 US dollar-denominated senior debt and four euro-denominated senior debt.
The news came after CS’s main shareholder pulled out of further financial support even as the bank is in the midst of a complex turnaround plan and reported “material weakness” earlier this week.
In the past five days alone, CS shares has fallen by around 7.59%.
First Republic rises thanks to the help of like-minded people
First Republic shares rallied after CNBC reported that a group of banks was considering paying $20 billion into First Republic. This came after the news that big banks like JP Morgan (JPM) and Morgan Stanley (MS) could be interested in a possible takeover of the bank. The report also said FRC is considering other options, including a capital increase and an outright takeover.
That report came even as the bank’s credit rating was downgraded to junk by S&P Global and Fitch Ratings, citing the risk of deposit outflows. This despite the bank focusing on strengthening its liquidity and capital position, and has secured additional funds from the Federal Reserve and JPMorgan, which increased its liquidity.
However, analysts remain cautiously optimistic on FRC stock with a Moderate Buy consensus rating based on eight buys, eight holds and one sell.