Credit Suisse shares also did not bottom on Wednesday. While the sick big bank’s stocks were still in positive territory when they opened, they again dropped significantly during trading and once again recorded new lows. Meanwhile, credit default swaps (CDS), aka protection against big bank default, hit new highs on Wednesday.
Around 1pm, CS shares fell 1.9 percent to CHF 2,848, hitting an all-time low of CHF 2,843. In turn, subscription rights prices for new CS shares are also falling: 9.4 cents, down 5.1 percent now, after losing a good 30 percent the day before. Meanwhile, the overall market is clearly up (SMI +0.9%).
Persistent downtrend
The shares have been in a steady downtrend for about two weeks – in mid-November the titles were still listing above four francs. The bearish action accelerated last week when CS announced a new loss of billions for the fourth quarter and higher outflows in client funds on Wednesday.
The exits raised market concerns about the bank’s worsening profitability. However, one market watcher said that although the “Liquidity Coverage Ratio” (LCR) is still above 100 percent and thus above supervisory authorities’ requirements, the worsening in liquidity ratios reported at the time also clearly worries investors.
Rumors of collapse
The price of five-year protection of default climbed to new highs of 409 basis points on Wednesday after closing at 407 points on Tuesday, according to Reuters data.
Credit Suisse’s protection against default was already at a similarly high level in early October, when rumors of the big bank’s collapse circulated on social media. At the beginning of the year, the CDS price was still 57 basis points. (pbe/SDA)