The banking sector continues to be volatile as stocks like the Swiss banking giant Credit Suisse (CS) and American bank First Republic (FRC) saw wild price swings in Thursday’s trading. Let us look at how the story for these two banks is quickly unfolding.
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Credit Suisse’s Woes Seem to be Easing
Shares of the beleaguered bank ticked up higher in morning trading after the bank’s investors heaved a sigh of relief following the Swiss National Bank’s announcement of a financial lifeline.
Credit Suisse announced that it would borrow $54 billion from the Swiss National Bank and the country’s financial regulator in the form of a covered loan facility and a short-term liquidity facility. The Swiss National Bank stated that CS “meets the capital and liquidity requirements imposed on systemically important banks.”
Moreover, CS also offered to buy back around 3 billion francs’ worth of debt, relating to 10 U.S. dollar-denominated senior debt securities and four euro-denominated senior debt securities.
This news came after CS’s top shareholder backed out of providing any more financial assistance even as the bank is in the midst of a complex turnaround plan and had reported “material weakness” earlier this week.
In the past five days alone, CS stock has dropped by around 7.59%.
First Republic Soars on Aid from Peers
Shares of First Republic rallied after CNBC reported that a group of banks was considering depositing $20 billion in First Republic. This came after news that big banks like JP Morgan (JPM) and Morgan Stanley (MS) could be interested in a potential acquisition of the bank. The report also stated that FRC is considering other options, including a capital raise and a full takeover.
This report came even as the bank’s credit rating was cut to junk by S&P Global and Fitch Ratings, citing deposit outflow risk. This is even as the bank has been focused on strengthening its liquidity and capital position and has secured additional funding from the Federal Reserve and JPMorgan, which boosted its liquidity.
Analysts, however, remain cautiously optimistic about FRC stock with a Moderate Buy consensus rating based on eight Buys, eight Holds, and one Sell.
