Credit Suisse attempted to rebound Thursday after its late Wednesday announcement to borrow up to $54 billion from the Swiss National Bank. The financial stock unraveled during Wednesday's U.S. and European market trade, shedding as much as 30% during the day.
Credit Suisse American depositary receipts surged 4% before reversing 0.5% lower Thursday in market trade. During premarket trade, CS bounced 5% as the financial institution said it will use the Swiss National Bank's Covered Loan Facility as well as a short-term liquidity facility to gain access to up to CHF 50 billion, or $54 billion.
The global investment bank said Wednesday the decision is to "pre-emptively strengthen its liquidity."
Credit Suisse is also making a cash tender offer to 10 U.S. dollar-denominated senior debt securities for up to $2.5 billion. The Zurich-based bank said it made a separate cash tender offer to four Euro denominated debt securities for approximately $530 million.
"These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders," CEO Ulrich Koerner said in a statement.
Meanwhile, the European Central Bank (ECB) Thursday carried through with a large interest rate increase of half a percentage point.
The ECB said it is "monitoring current market tensions closely and stands ready to respond as necessary to preserve price stability in the euro area."
JPMorgan Chase analyst Kian Abouhossein wrote Thursday morning the firm is keeping a "Neutral" rating on Credit Suisse following the Swiss National Bank loan announcement. Abouhossein said this allows the financial stock to "to calm down markets."
The analyst added that long-term, Credit Suisse's "situation is about ongoing market confidence issues."
He also said the Credit Suisse saga may end with a takeover. This would likely be by fellow Swiss bank UBS, according to Abouhossein.
Credit Suisse: A Hectic Wednesday
In the run up to Credit Suisse's decision late Wednesday, the Swiss National Bank declared Credit Suisse well-capitalized, and pledged to provide additional liquidity if necessary. Credit Suisse had appealed to the Swiss National Bank and Swiss regulator FINMA for a public show of support.
On Wednesday, Credit Suisse plunged after the chairman of Saudi National Bank, Credit Suisse's top shareholder, ruled out further financial intervention. Credit Suisse's U.S. ADRs hit a record-low 1.76 intraday. CS stock rebounded somewhat to close down 14% to 2.16, following the Swiss central bank's pledge of support.
On Thursday, Saudi National Bank Chairman Ammar Al Khudairy told CNBC Thursday panic about the Swiss lender was "unwarranted."
Credit Suisse has been struggling for years, recording losses in the last five quarters. CS ADRs are down 69% over the past year as of Wednesday.
On Tuesday, Credit Suisse released its annual report, which noted "material weaknesses" to its financial controls for 2021 and 2022.
European Bank Declines Spill To U.S.
The CS meltdown Wednesday rippled out across European banks and financial stocks.
In U.S. market action, UBS retreated 6.4% Wednesday and Germany's Deutsche Bank dropped 6.8%.
On Thursday, UBS ADRs edged up 2.8% while DB stock retreated 1.8%.
U.S. banks and financials had seen a slight rebound Tuesday as the financial sector digested regulatory efforts to contain the contagion from SVB Financial and Signature Bank. However, on Wednesday financial stock JPMorgan Chase slumped 4.7% while Wells Fargo slid 3.2% lower.
Regional bank First Republic retreated 21.4% Wednesday after rebounding Tuesday afternoon. First Republic is weighing options to move forward. This includes a potential sale, Bloomberg reported late Wednesday.
Thursday afternoon, a number of major U.S. banks announced a $30 billion rescue package for First Republic Bank.
Bank of America, Citigroup, JPMorgan Chase and Wells Fargo said Thursday they are each making a $5 billion uninsured deposit into First Republic Bank. Goldman Sachs and Morgan Stanley are each making an uninsured deposit of $2.5 billion.
BNY Mellon, PNC Bank, State Street, Truist and U.S. Bank are each making an uninsured deposit of $1 billion.
FRC stock sank 34% early Thursday before advancing up around 10.3%.
On Wednesday, Beverly Hills, Calif.-based Pacific Western Bank pared losses but still sank 13%. PACW had rebounded 33% on Tuesday. Western Alliance rallied 8.3% Wednesday after hedge fund Citadel said it had taken a 5.3% stake in the bank.
Pacific Western sank 21% before edging up 0.7%. WAL stock fell 12% early before reversing and surging up 14.2%.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
