Credit Suisse At A Crossroads As Stocks Slide Again

Credit Suisse shares fell again on Friday despite being bolstered by the Swiss central bank as investors worry about which road the embattled lender will take to try and restore confidence.

Yet more drastic restructuring, closure of its investment banking arm or even a takeover by a rival were being mooted by analysts studying Switzerland's second-biggest bank, one of 30 deemed of global importance to the international banking system.

Amid fears of contagion after the collapse of two banks in the United States, on Wednesday Credit Suisse's biggest shareholder said it would "absolutely not" up its stake in the bank for regulatory reasons.

That triggered panic in the markets and the bank's shares plunged more than 30 percent during the day's trading to a new record low of 1.55 Swiss francs a share.

The Swiss National Bank came to the rescue in a bid to reassure the markets, with Credit Suisse announcing it would borrow 50 billion francs (US$54 billion) from the SNB to reinforce the group.

After recovering some ground on Thursday, Credit Suisse shares closed down eight percent on Friday at 1.86 Swiss francs each as the Zurich-based lender struggled to regain the confidence of investors.

The central bank lifeline raises questions about whether an orderly bankruptcy could happen, in which regulators would take over Credit Suisse and take charge of dismantling it.

Analysts at financial services giant JPMorgan, insisting that "status quo is no longer an option", considered the scenario of a takeover by another bank, with UBS, Switzerland's biggest, "the most likely".

Given the weight such a merger would confer on the two banks, they thought the Swiss domestic branch of Credit Suisse, which includes retail banking and loans to small and medium enterprises, could be listed on the stock market or spun off.

With the collapse of Credit Suisse's stock – shares were worth 12.78 Swiss francs in February 2021 – its market capitalisation has melted, potentially making it easy prey.

The idea of Switzerland's biggest banks joining forces regularly resurfaces but is generally dismissed due to competition issues and risks to the Swiss financial system's stability, given the size of the bank that would be created by such a merger. (AFP)