A Swiss flag flies over a Credit Suisse sign in Bern, Switzerland
FABRIC COFFRINI | AFP | Getty Images
Credit Suisse executives are in talks with the bank’s major investors to reassure them amid growing concerns over the Swiss lender’s financial health, the Financial Times reported, citing people involved in the discussions.
An executive involved in the talks told the Financial Times that teams at the bank were actively engaging with their top clients and counterparties over the weekend, adding that they received “messages of support”[ads1]; from top investors.
Shares in Credit Suisse hit new lows last week. The stock is down around 55 percent so far this year.
Spreads on the bank’s credit default swaps (CDS), which provide investors with protection against financial risks such as default, rose sharply on Friday. They followed reports that the Swiss lender is looking to raise capital, citing a memo from CEO Ulrich Koerner.
The FT said the executive denied reports that the Swiss bank had formally approached its investors about possibly raising more capital, insisting that Credit Suisse was “trying to avoid such a move with its share price at record lows and higher borrowing costs due to rating downgrades ».
The bank told Reuters it is conducting a strategy review that includes potential divestitures and asset sales, and that an announcement is expected on October 27, when the bank publishes its third-quarter results.
Credit Suisse has also been in talks with investors to raise capital with various scenarios in mind, Reuters said, citing people familiar with the matter as saying it includes a chance the bank could “largely” exit the US market.
The latest from Credit Suisse signals a “rocky period” ahead, but it could lead to a change in the US Federal Reserve’s direction, John Vail, global chief strategist at Nikko Asset Management, said on CNBC’s “Squawk Box Asia” on Monday.
“The silver lining at the end of this period is the fact that central banks are likely to start easing for a while as both inflation is down and financial conditions deteriorate dramatically,” Vail said. “I don’t think it’s the end of the world.”
“We struggle to see anything systemic,” analysts at Citi said of a report on possible “contagion” on US banks by “a major European bank.” The analysts did not mention Credit Suisse.
“We understand the nature of the concerns, but the current situation is night and day from 2007, when balance sheets are fundamentally different in terms of capital and liquidity,” the report said, referring to the financial crisis that unraveled in 2007.
“We think the US banking stocks are very attractive here,” the report said.
Read the full Financial Times report here.