Swiss aid boosts Credit Suisse shares

GENEVA (AP) — Shares of Credit Suisse rose 30% on Thursday after the bank said it would capitalize on its position with a nearly $54 billion loan from the Swiss central bank, boosting confidence as that the system fears bank transfers from the United States to Europe.

It was a huge turnaround from the day before, when shares of Switzerland’s second-largest commercial bank plunged 30% on the SIX exchange after its biggest investor said it would not inject more money. money in Credit Suisse.

It dragged down other European banks after the collapse of several US banks fueled fears about the health of global lenders. Shares of Societe Generale SA and BNP Paribas in France, as well as Deutsche Bank in Germany and Barclays Bank in Britain rose on Thursday after sharp falls the day before.

Credit Suisse, already struggling long before the U.S. bankruptcies, said on Thursday it would exercise its option to borrow up to 50 billion francs ($53.7 billion) from the Swiss National Bank.

“This additional liquidity would support Credit Suisse’s core customers and businesses as Credit Suisse takes steps to create a leaner, more specialized bank based on customer needs,” the company said.

Banking instability cast a shadow over Thursday’s meeting of the European Central Bank. Before chaos ensued, ECB chief Christine Lagarde said it was ‘highly likely’ the institution would make a big half-percentage-point hike in interest rates to combat persistent inflation.

After European banks collapsed on Wednesday, analysts said the outcome of the meeting was difficult to predict, with some saying the central bank could stick to a quarter-point hike. Higher rates are dampening inflation, but in recent days they have stoked fears they may have caused hidden losses on banks’ balance sheets.

Speaking at a financial conference in the Saudi capital Riyadh on Wednesday, Credit Suisse Chairman Axel Lehmann defended the bank, saying “we’ve already taken the medicine” to reduce risk.

The bank said this week that its executives identified “significant weaknesses” in the bank’s internal controls over financial reporting late last year. This raised doubts about the bank’s ability to weather the storm.

Credit Suisse is “a much bigger concern for the global economy” than the mid-sized banks that failed in the United States, said Andrew Kenningham, chief European economist at Capital Economics.

The company has several subsidiaries outside Switzerland and manages investment fund operations.

“Credit Suisse is not just a Swiss problem, but a global problem,” the expert said.

The issues “raise once again the question of whether this is the start of a global crisis or just another ‘idiosyncratic’ case,” Kenningham wrote. “Credit Suisse was widely seen as the weakest link among major European banks, but it is not the only bank that has struggled with weak profitability in recent years.”

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McHugh reported from Frankfurt, Germany. Associated Press writers Joseph Krauss in Ottawa, Ontario, and Angela Charlton in Paris contributed to this report.