The capitalization of Credit Suisse is falling
2022.11.30 11:28
The capitalization of Credit Suisse is falling
Budrigannews.com – The cost of insuring exposure to Credit Suisse’s debt reached a record high on Wednesday, and the bank’s shares and bonds fell. This caused the planned $2.4 billion fundraising effort by Credit Suisse to help pay for a major overhaul to be hampered by mounting market obstacles.
The rights issue is a component of the Swiss bank’s larger capital raise of 4 billion francs, which was approved by shareholders last week to help finance Credit Suisse’s recovery from the largest crisis it has ever experienced.
ABN Amro’s head of bank research, Joost Beaumont, stated, “Investor confidence has not been restored yet.”
Credit Suisse declined to discuss the changes in the market.
S&P Global (NYSE:) reports that the cost of insuring against a Swiss bank defaulting on its debt, which is represented by five-year credit default swaps on Credit Suisse, increased to approximately 446 basis points (bps) from 409 bps at the open.Data from market intelligence showed.
This compares to 57 bps at the beginning of the year and is comparable to 466 bps levels for the Italian bailout bank Monte dei Paschi di Siena.
CDS for additional European banks like Commerzbank (ETR:), BME: Santanderor on the other hand Swiss friend UBS are between 69-81 bps.
Credit Suisse’s shares fell 2% to a new record low after opening higher, marking their ninth consecutive session in the red.Since the beginning of the year, the stock has lost more than 66%.
After reversing initial gains, Credit Suisse rights for its 2.4 billion Swiss franc share issue were down 8%.This was on top of Tuesday’s 30% decline.
The rights to subscribe to new shares can be exercised by holders until December 8, but investor response has been lukewarm thus far.
According to Tradeweb data, Credit Suisse bonds also fell, with additional tier 1 dollar bonds falling by more than 4 cents and many falling below levels seen during a sell-off in the bank’s shares and bonds at the beginning of October.
Last week, Switzerland’s second-largest bank announced that wealthy customers had made significant withdrawals and that it was on track for a pre-tax loss of up to 1.5 billion Swiss francs in the fourth quarter.
Credit Suisse started a turnaround plan last month, despite a string of scandals and growing losses.
Beaumont stated, “The strategic review was announced and the bonds had a little rebound, but it is still a difficult story with question marks on the execution of the strategic review.”
The holding company of Credit Suisse also issued a bond in euro at a record coupon of 7.75% in the middle of November. It is listed at a price of 98.5 cents below par, implying that investors require a discount to purchase the bond.
