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Euro Financial Movers: Street Cred
Simon Adamson - Global Head of Financials Research
Paola Biraschi - Senior Analyst - European Banks
Jennifer Ray - Senior Analyst - European Banks
Larissa Knepper - Senior Analyst - European Insurance
Martina Seydoux - Senior Analyst - European Insurance
Advitiya Narang - Analyst - European Banks
EXECUTIVE SUMMARY
- Credit Suisse warned it is likely to be loss-making again in 2Q22 as it battles challenging market conditions.
- State Street was rumoured to be preparing a bid for Credit Suisse, but we remained sceptical, and it eventually denied the reports.
- The Bank of England produces a resolvability assessment of major UK banks and sees a great deal of progress while identifying further improvements to be made.
- Virgin Money UK launched a cash tender for one of its AT1s six months ahead of its first call and simultaneously issued a replacement AT1.
- We summarised the key trends and developments for European reinsurers in 1Q22.
- Groupama was upgraded by Fitch to A+ with a stable outlook.
- Aviva issues a £500 mn RT1 bond, and VIG issues a €500 mn Tier 2 bond after launching a tender on its existing €500 mn Tier 2 bond.
BANKS
Weekly news
In what is becoming a regular occurrence, Credit Suisse delivered another profit warning after market conditions remained difficult in April and May, saying it is likely to report a 2Q22 loss for its Investment Bank and for the group as a whole. This would be its fourth quarterly loss in the past six quarters, having also reported a loss for FY21. The poor performance was attributed to market volatility, weak customer flows and ongoing client deleveraging in the APAC region, rather than to one-off or exceptional charges, although CS also mentioned a mark-to-market loss on its 8.6% investment in Allfunds Group, on which it made a loss of CHF 353 mn in 1Q22.
Perhaps not coincidentally, Swiss news blog ‘Inside Paradeplatz’ claimed that State Street was planning an imminent takeover of Credit Suisse at CHF 9 per share, 34% above the current share price. After waiting all day, State Street announced, somewhat anticlimactically, that it would not comment on the rumour, but our team in New York was sceptical, not least because State Street still has a sizeable deal pending – the acquisition of BBH announced last September. Eventually, State Street was forced to announce that “there is no basis to the continuing market rumours”, confirming that it is not pursuing any acquisition or business combination with Credit Suisse.
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