Monday, December 4, 2023

Credit Suisse shares plummet 30% as banks from Germany to Ireland are hit hard

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Shares in Credit Suisse — one of Europe’s largest lenders — plummeted as much as 30% today, a sign of the worsening banking crisis as German, British, and Irish banks also suffered sharp stock market falls. 

Any further fallout from Credit Suisse, whose banking balance sheet is worth as much as €540bn, would surpass that sparked when US-based lenders, including Silicon Valley Bank, collapsed last weekend. 

“Credit Suisse is not just a Swiss problem but a global one. Second, if Credit Suisse were to fail much would depend on how orderly the resolution is,” said Andrew Kenningham, chief Europe economist at Capital Economics, in an early morning commentary.    

Mr Kenningham said previous banking crises suggest “a quick resolution can be achieved without triggering too much contagion” as long as regulators act decisively. But he warned that “the risk of a botched resolution will be worrying the markets until a solution becomes apparent”. 

World banking was rocked this week by the collapse of Silicon Valley Bank, a US specialist lender that had built up a huge deposit base from lending to technology startups in the US and beyond. 

The demise of Silicon Valley Bank in particular signalled the difficulties banks and technology firms were facing in dealing with the rapid rise in global interest rates since the US Federal Reserve and the European Central Bank started to hike aggressively last year. Official rates are rising at their fastest pace since before the onset of the global financial crisis 15 years ago.  

Deep-seated problems facing Credit Suisse were well known by analysts as the bank over many years struggled to generate high levels of earnings. Late last year, the lender recruited former Bank of Ireland chief executive  Francesca McDonagh as its new chief operating officer. She also joined the boards of  Credit Suisse International and Credit Suisse Securities Europe earlier this year. 

Banking shares across Europe were pummeled. Deutsche Bank shares closed over 10% lower, while shares in HSBC, the British bank that bought the UK arm of Silicon Valley Bank for a nominal £1 on Sunday, dropped by 5%.

AIB shares finished almost 5% lower in the session, and shares in Bank of Ireland closed 8% lower. Both banks have lost the share price gains won this year, but hold onto huge increases from a year ago.

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