Credit Suisse shares are set to open lower than the previous day’s close. Credit Suisse Group AG ADR which closed at $2 yesterday, is quoting $0.80 in the pre-market session today, down by almost 60%. Other banking stocks are showing mixed sentiments. JPMorgan Chase & Co. and Wells Fargo & Co. fell 0.7% each, while Bank of America Corp. and Citigroup Inc. remained unchanged. First Republic Bank, which was rescued for $30 billion last week, fell 20% after losing a third of its value on Friday.
Stock price of First Republic Bank is falling as S&P Global Inc. downgraded First Republic Bank’s credit rating for the second time in a week on Monday, warning that a $30 billion rescue deal had not resolved the lender’s problems.
First Republic, which has already lost 80% in just 10 days, is now on course to continue its downward trend as a result of the ratings cut. Shares lost up to 37% of their value before recovering half of those losses.
First Republic’s long-term issuer credit rating was cut by S&P from BB+ to B+, after the lender had already been placed in the sub-investment grade, or junk, category last Wednesday. The ratings agency stated that although easing near-term liquidity strain, a recent $30 billion infusion from some of Wall Street’s largest lenders may not be enough to address the “severe” issues the bank is now likely to face.
Also Read: Investor Alert! Credit Suisse shareholders to receive 1 UBS share for every 22.48 shares held
UBS Group AG’s is acquiring Credit Suisse and under the terms of the all-share transaction, Credit Suisse shareholders will receive 1 UBS share for every 22.48 Credit Suisse shares held, equivalent to CHF 0.76/share for a total consideration of CHF 3 billion. The transaction is not subject to shareholder approval. Following the failures of Silicon Valley Bank and Signature Bank in the United States earlier this month, the takeover of the 166-year-old Swiss lender only adds to investor jitters.
Holders of additional tier 1 bonds will be wiped out under the terms of UBS Group AG’s acquisition of Credit Suisse.