March 15, 2023, a man is seen in silhouette passing a branch of the Swiss Credit Suisse bank in Vevey, western Switzerland
Fabrice Cofrini | AFP | Getty Images
Bank shares were under pressure on Wednesday due to the sharp fall in the price Credit Switzerland shocked a segment of the market already reeling from two major bank failures in the past week.
Shares of the Swiss lender fell more than 20% after the chairman of the largest lender – the Saudi National Bank – said it will not provide further financial support, even though it sees Credit Suisse as a strong bank and welcomes his turnaround plan.
After European markets closed, the Swiss National Bank said in a statement that it would provide additional liquidity to Credit Suisse if needed. US-listed stocks reversed some of their losses following the news, closing about 14%.
Credit Suisse announced Tuesday that it had found “material weakness” in previous years’ financial reporting process. Other European banks also fell, including a 6.8% decline for US-traded shares of Deutsche Bank.
The move also appeared to affect major US banks. Shares of Wells Fargo fell more than 3%, like Goldman Sachs. JPMorgan lost 4.7% while Citi group slipped 5.4%.
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Shares of Wells Fargo were under pressure on Wednesday.
Some regional banking stocks saw even bigger declines. Shares of First Republic fell more than 21% after the debt ratio was lowered by S&P Global Ratings and Fitch. PacWest Bancorp down nearly 13%. Western Alliance saw steep losses in morning trading before moving higher, continuing a volatile trading trend in the stock.
Credit Suisse’s struggles come on the heels of the collapse of Silicon Valley Bank And signature bank in the US, those failures triggered major sell-offs in regional bank stocks on Monday. The SPDR S&P Regional Bank ETF (KRE) fell 1.6% on Wednesday.
While Credit Suisse’s woes seem to have nothing to do with mid-sized US banks, the combination of the two problems could lead to a broader rethinking of the banking system among investors, according to Bleakley Financial Group’s Peter Boockvar.
“What this tells us is that there is a potential for a major contraction in lending that banks are getting into (to) focus more on strengthening balance sheets rather than focusing on lending,” said Boockvar Wednesday on CNBC’s “Squawk Box”. .”
“It’s a rethink of the balance that the markets have. Also, with many of these banks, you have to ask yourself if they’re going to have to start raising equity,” he added.
In that spirit, Wells Fargo continues Tuesday filed to raise $9.5 billion in capital through the sale of debt, warrants and other securities. The bank said the new money will be used for general corporate purposes.
The fallout from the collapse of the SVB could also lead to more regulation and rising costs for the US banking industry, which may include higher fees for deposit insurance regulators.
