Lojanica
Registered: Jan 2010
Posts: 743 |
06-14-12 05:53 PM
Credit Suisse Plunges to 9-Year Low as SNB Tells It to Bulk Up
By David Benoit @ Bloomberg
Switzerland must have been listening to Jamie Dimon’s Senate appearance yesterday.
The day after U.S. senators and Dimon all but sanctified the need for banks to hold capital, the Swiss central bank on Thursday said UBS and Credit Suisse need to bolster their capital positions.
It was a blow to confidence in Credit Suisse, sending its stock plummeting over 9% in recent New York action to $18.04. That’s the lowest the ADRs have traded in over nine years, according to FactSet Research.
UBS, meanwhile, was down just 0.4% to $11.54.
From Dow Jones’ Neil MacLucas and John Revill:
The comments spooked investors and weighed on both banks’ shares. Credit Suisse stock was particularly hard hit on concerns that it could have to raise substantial amounts of dilutive common equity and possibly cut its dividend to meet the Swiss National Bank’s demands.
“Economic and financial conditions for the Swiss banking sector have deteriorated since June 2011, and the big banks’ loss-absorbing capital is still below the level needed to ensure sufficient resilience,” the Swiss National Bank said in its annual report on financial stability in Switzerland, released to coincide with the central bank’s monetary policy review.
While the two have made progress in building up their capital to meet tougher standards than international bank reforms called Basel III, and rank among the best capitalized in the world, Credit Suisse in particular needs to do more, the SNB said.
Switzerland was already imposing heavier standards on capital levels on their banks than other countries, but as Dimon pointed out to an inquisitive senator, Credit Suisse and UBS are significantly bigger than Switzerland’s GDP.
SNB said the move is driven by the renewed escalation of the euro-zone crisis. Though SNB believes the losses from exposure to the periphery countries would be “relatively small,” the “accompanying deterioration in economic conditions would bring substantial losses.”
[B]Credit Suisse said it was one of the best funded and capitalized global banks.{/B]
My take:
SNB has a huge stake in protecting its most prized industry in the context of the unwinding European currency debacle. Having said that CS generates the bulk of its revenues from asset management which HAS BEEN GROWING at a steady clip and should accelerate after the smoke clears.
Take advantage of the upcoming discounts in the wake of unjustified fear.
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