Credit Suisse leads Europe bank stock rout after short-lived SVB respite

Francesco Canepa, Rae Wee, and Noele Illin

(Reuters) – Europe’s banks stocks fell on Wednesday as Credit Suisse tumbled to a new low. This was in response to investors continuing to worry about stress within the sector after the collapse at Silicon Valley Bank.

Financial executives and regulators around the globe have attempted to alleviate contagion fears after SVB, a tech-focused lender, and another U.S. Bank failed last week. However, concerns remain about the health and viability of smaller institutions.

An 18% drop in Credit Suisse, the troubled Swiss lender, led to a wider European banking index falling.

The rapid rise in interest rates has made it more difficult for some businesses pay back or service loans taken from banks. This has increased the risk of loss for lenders who are also concerned about a possible recession.

However, European Central Bank policymakers are still leaning towards a half-percentage-point rate hike on Thursday, a source told Reuters, as they expect inflation will remain too high in coming years.

Investors started to doubt the ECB’s commitment for another large rate hike after SVB’s collapse caused shockwaves across the markets.

However, the source stated that the euro zone’s central banks would not change their plan to raise rates by 50bps on Thursday as this would harm its credibility.

The United States has shifted to tighter regulation of banks. This is especially true for mid-tier banks like Signature Bank New York-based Signature Bank and SVB. These collapses have triggered market turmoil.

“We have instilled some stability, but I honestly don’t know if it is stability or the appearance of stability, because I certainly do not know what is occurring behind the scenes at the deposit base of several thousand small to medium sized banks across the United States,” John Briggs, Global Head of Economic Strategy at NatWest Markets, said the following:

Moody’s Investors Service revised Tuesday its outlook for the U.S. bank system. “negative” Starting at “stable”The sector faces increased risks, the company stated.

After three days of heavy selling, the Tokyo Stock Exchange banks index rose more than 4% earlier.

Investors were particularly concerned by the large bond holdings of Japanese lenders, especially U.S. Treasuries. However, Shunichi Suzuki, the Japanese finance minister, stated that differences in the structure and deposits of banks meant that local banks would not be subject to similar incidents to SVB.

SVB AFTERMATH

On Tuesday, battered U.S. bank stocks gained some ground. This was due to news that some SVB assets were being purchased by private equity and buyout companies. Investors are hopeful that this will help to prevent a larger crisis.

Apollo Global Management Inc., Blackstone Inc., and Carlyle Group were some of the people who expressed interest in a loan book held by SVB.

Separately SVB Financial Group announced Tuesday that Goldman Sachs was its acquirer of a portfolio of bonds on which it had recorded a $1.8 billion loss. This transaction was what set the stage for SVB’s failure.

The top bosses of HSBC in Britain have asked employees at SVB’s rescued UK division to give assurances to clients “their deposits are safe and loans are supported” As the integration process after its takeover began, a memo was issued by the bank.

Walt Bettinger, chief executive of Charles Schwab said Tuesday that the bank had ample liquidity and was not currently looking for capital or deals.

According to Bettinger, the firm saw an influx of $4Billion in assets to its parent company Friday when clients transferred assets to Schwab from other companies.

SVB’s shutdown on March 10 – followed two days later by the collapse of Signature Bank – forced President Joe Biden to rush out assurances that the U.S. financial system is safe and prompted emergency measures giving banks access to more funding.

To prevent a similar crisis in the future, the U.S. Federal Reserve has also considered tougher rules and supervision for midsize banks that are similar to SVB.

Inflation data from the United States showed no signs of an improvement in the persistent price pressures in the world’s biggest economy, adding to the Fed’s puzzle.

“A mixed set of signals leave the Fed more cautious about its next steps and focused on limiting financial contagion,” said Lombard Odier’s chief investment officer Stéphane Monier.

(Reporting by Rae Wee from Singapore, Francesco Canepa & Balazs Coranyi in Frankfurt; Amanda Cooper and Sinead Cruise in London; Writing by Alexander Smith. Editing by Sam Holmes, ElisaMartinuzzi, Catherine Evans.

The February consumer price index report shows an inflation rate of 6%, compared to a year ago.

California Governor Gavin Newsom said he has a multi-million-dollar deal with Walgreens regarding abortion pills.

Rep. Steve Toth

Alex Bruesewitz

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