Credit Suisse crisis averted for now, First Republic stock price sinks again

After being denied funding by Saudi National Bank for regulatory reasons, Credit Suisse saw the biggest-ever slump in the stock on Wednesday

FOMC meeting, next week, Credit Suisse crisis, SVB, US stock futures
The Federal Reserve is expected to remain more dovish in the FOMC meeting next week.

The Credit Suisse crisis seems to be averted, just for now. Swiss lender Credit Suisse Group AG is to secure funding from Swiss National Bank after being shown the door by Saudi National Bank, its top investor. A credit line of up to 50 billion Swiss francs ($54 billion) from the Swiss authorities is available to Credit Suisse now.

Meanwhile, there are reports that the San Francisco-based lender First Republic Bank is investigating strategic options, such as a sale, after being downgraded by S&P Global Ratings and Fitch Ratings on Wednesday. After closing more than 20% lower yesterday, the stock price of First Republic Bank is quoting 35% lower on Thursday’s market session.

After being denied funding by Saudi National Bank for regulatory reasons, the Zurich-based bank saw the biggest-ever slump in the stock on Wednesday. Credit Suisse Group AG ADR listed on NYSE closed 14% lower at $2.16. On Thursday, it is trading about 2.5% higher than the previous day’s close. Earlier, Credit Suisse had reported ‘material weakness’ in their internal controls over the financial reporting process during 2021 and 2022.

US stocks ended the day’s session almost flat with Nasdaq Composite marginally in the green. Investors’ appetite for risk is still not there even though governments are doing their bit to shore up confidence. “Efforts by U.S. officials and regulators to stop Silicon Valley Bank’s collapse from spilling over into the financial system appeared to have stabilized markets on Tuesday. But the selloff in stocks and hunt for safe assets began again on Wednesday, showing that investors remain on edge about the potential for tremors in the global banking system,” says Mitul Shah, Head of Research – Institutional Desk
Reliance Securities.

The collapse of Silicon Valley Bank following losses in its bond portfolio is the biggest bank failure since the global financial crisis and has sent shockwaves through the banking sector. The focus has now shifted to European banks. “Globally, the crisis in the US banking system has roiled markets with the banking sector coming under pressure across markets on fears of contagion. Markets are concerned over the health of the financial system reiterated by rating agency Moody’s cutting its outlook on the US banking system from stable to negative,” adds Shah.

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First published on: 16-03-2023 at 16:55 IST
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