Credit Suisse Shares Plunge 9.2% as Bank’s CDS Rose on Friday

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Credit Suisse officials are notably exploring all means to get back on good terms with rating agencies, analysts, investors, and their broader stakeholders. 

Switzerland-based global investment bank and financial services firm Credit Suisse Group AG (SWX: CSGN) has seen its shares plunge by as much as 9.21% to 3.61 CHF following reports that the bank’s executives are meeting with key stakeholders to reassure the firm’s financial position.

As reported by the Financial Times, the executives of the Swiss financial giant spent the last weekend reassuring investors that the bank’s capital base and liquidity are healthy despite the current downturn in its share performance. The move to pacify investors came after the spread on the bank’s Credit Default Swaps (CDS) rose sharply on Friday.

The Credit Default Swap is an indicator that shows how well the bank can protect its creditors against financial risks such as default. The plunge was interwoven with the claims that the bank’s Chief Executive Officer Ulrich Koerner is looking to raise some capital from investors.

Though the FT reported that the bank’s executives are denying the claims of looking to raise funds, a discussion that was notably part of the talks with investors as well as what was shared with employees in a memo.

“I trust that you are not confusing our day-to-day stock price performance with the strong capital base and liquidity position of the bank,” the CEO said in a separate staff memo obtained by CNBC.

The company’s attempt to maintain a bullish and confident business outlook is currently being damned by the instability in its share price. Credit Suisse has seen its shares plunge by as much as 60% in the year-to-date period.

Part of the reassurance given by Koerner was that the bank will not raise new funds and that it “was trying to avoid such a move with its share price at record lows and higher borrowing costs due to rating downgrades.”

Credit Suisse Shares Drop and Systemic Impact

Credit Suisse officials are notably exploring all means to get back on good terms with rating agencies, analysts, investors, and their broader stakeholders.

According to a report by Reuters citing people close to the firm’s plans, the Swiss banking giant can move its business outside of the United States in order to pursue value concentration in its most profitable regions.

Should this happen, John Vail, chief global strategist at Nikko Asset Management believes it will likely make the United States Federal Reserve and other central banks rethink their aggressive rate hike approach as harm to Credit Suisse can underscore a more pervasive negative impact on others.

“The silver lining at end of this period is the fact that central banks will probably start to relent some time as both inflation is down and financial conditions worsen dramatically,” Vail said. “I don’t think it’s the end of the world.”

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Benjamin Godfrey

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