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Credit Suisse shares rose 30% on Thursday after the bank announced it would leverage its position with a nearly $54 billion loan from the Swiss central bank, bolstering confidence as fears in the banking system shifted from the United States. to Europe.
It was a huge reversal from the previous day, when shares of Switzerland’s second-largest commercial bank plunged 30% on the SIX exchange after its biggest investor said it would not pump more money into Credit Suisse.
That dragged down other European banks after the collapse of several US banks stoked fears about the health of global lenders. Shares of France’s Société Générale SA and BNP Paribas, as well as Germany’s Deutsche Bank and Britain’s Barclays Bank rose on Thursday after sharp falls the previous day.
Credit Suisse, already in trouble long before the US bankruptcies, said on Thursday it would exercise its option to borrow up to 50 billion francs ($53.7 billion) from the Swiss National Bank.
“This additional liquidity would support Credit Suisse’s core customers and businesses as Credit Suisse takes steps to create a leaner, more specialized bank based on customer needs,” the firm said.
Bank instability has cast a shadow over Thursday’s meeting of the European Central Bank. Before the chaos ensued, ECB chief Christine Lagarde had said it was “very likely” that the institution would make a sizeable half-percentage point hike in interest rates to combat persistent inflation.
After European banks collapsed on Wednesday, analysts said the outcome of the meeting was hard to predict, with some saying the central bank could stick with a quarter-point increase. Higher rates curb inflation, but in recent days they have fueled fears that they may have caused hidden losses on banks’ balance sheets.
Speaking Wednesday at a financial conference in the Saudi capital Riyadh, Credit Suisse Chairman Axel Lehmann defended the bank, saying “we have already taken the medicine” to reduce risk.
The bank said this week that its managers had identified “material weaknesses” in the bank’s internal controls over financial reporting late last year. That raised doubts about the bank’s ability to weather the storm.
Credit Suisse is “a much bigger concern for the global economy” than the midsize banks that have failed in the United States, said Andrew Kenningham, chief European economist at Capital Economics.
The firm has several subsidiaries outside of Switzerland and manages investment fund operations.
“Credit Suisse is not just a Swiss problem, but a global one,” said the expert.
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