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Credit Suisse: Rumour Has It
Simon Adamson - CEO of CreditSights Ltd / Head, Global Financials Research
EXECUTIVE SUMMARY
- Rumours and speculation over the weekend about Credit Suisse’s imminent collapse look wildly exaggerated, but the bank is struggling to maintain market confidence.
- Its financial position at 30 June was actually relatively solid, despite its recent weak performance, and we think fears over the risks, including on its AT1 securities, have been overplayed.
- Much of the market negativity reflects concerns that CS might have to raise new capital to manage its restructuring programme – we think it will try to avoid this by focusing on shrinking its balance sheet instead.
- Nonetheless, the bank is facing a volatile few weeks before it discloses the details of its restructuring plan on 27 October.
Just when we thought the days of speculation about major bank defaults were in the past…
A twitter storm of rumours predicting Credit Suisse’s (CS’s) imminent demise erupted over the weekend. Our view is that they have no basis in fact and wildly exaggerate CS’s financial weakness. The main problem for CS management is knowing how to respond without further inflaming the situation: a memo by CEO Ulrich Körner to employees on Friday, which sought to reassure them about CS’s financial strength, seems to have had the opposite effect, possibly because of his injudicious observation that CS was facing “a critical moment”.
It is hard to comment on speculation that does not appear to be based on fact, but in this note we attempt to separate fact and rumour.
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