Why Is Credit Suisse (CS) Stock Down 25% This Week?
What a dramatic week for bank stocks. It started with pressure on the regional banks amid several U.S. bank failures. Those issues then spread to Credit Suisse (NYSE:CS) and weighed on European banks. Despite some seemingly good news earlier t…
What a dramatic week for bank stocks. It started with pressure on the regional banks amid several U.S. bank failures. Those issues then spread to Credit Suisse (NYSE:CS) and weighed on European banks. Despite some seemingly good news earlier this week, CS stock is back under pressure on Friday.
At last check, shares were down 8.5% on the NYSE, and shares are lower by about 26% for the week.
Worries over U.S. regional banks kicked off the concerns about scandal-ridden Credit Suisse. That’s as SVB Financial (NASDAQ:SIVB) and Signature Bank (NASDAQ:SBNY) failed over the last week, while First Republic Bank (NYSE:FRC) has needed rescuing as well.
However, investors were again spooked when Credit Suisse’s largest shareholder, the Saudi National Bank, said that it “wasn’t considering adding to its investment due to regulatory rules. Saudi National Bank owns 9.9% of Credit Suisse. Capital requirements often prevent banks from holding more than 10% of other banks.”
The Saudi National Bank could have done or said much worse but noted regulatory issues were the problem. Still, the comments sparked fear that Credit Suisse could be on the brink. It doesn’t help that the bank has struggled for several years.
Even before this debacle began, CS stock was in a steady downtrend. From its January 2022 high to its February 2023 low, shares were down almost 75%.
What Will Happen With CS Stock?
Currently, shares of the U.S.-listed CS stock are hitting all-time lows this week. That’s never a good sign for any stock, let alone a bank.
Although investors are speculating on some combination, UBS Group (NYSE:UBS) reportedly opposes a forced tie-up with Credit Suisse. While Swiss regulators have said it will provide liquidity to Credit Suisse if needed, investors are rightfully concerned.
It’s a concern to start seeing so many dominos begin to fall.
First, the U.S. regional banks are under duress. That’s as the SPDR S&P Regional Banking ETF (NYSEARCA:KRE) fell 31% from the high on Monday, March 6, to the low on Monday, March 13. Down another 6% on Friday and just 3.75% above this week’s low isn’t exactly reassuring investors.
Now we’ve got worries out of European banks. It doesn’t help that the European Central Bank just raised interest rates by another 50 basis points this week and as the Federal Reserve prepares to potentially raise rates again next week.
For this moment, Credit Suisse is still standing after it accepted a $54 billion lifeline from the Swiss National Bank. However, sentiment remains very fragile, and outflows from the bank continue.
Credit Suisse will now work out different scenarios over the weekend. While it’s hardly a confidence booster, investors should be aware that more drama in this sector is likely to continue, and more focus will be on CS stock next week.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.
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