Financial shares fall as Credit Suisse becomes latest crisis for the sector
- Shares of the Swiss bank fell more than 20% after its biggest lender said it would not provide any further financial support.
- The move also appeared to affect major US banks.
- While Credit Suisse’s struggles appear to have nothing to do with US middle-market banks, the combination of the two problems could spark a broader scrutiny of the banking system among investors, according to Bleakley Financial Group’s Peter Boockvar.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, March 13, 2023.
Brendan McDermid | Reuters
Bank stocks were under pressure on Wednesday as Credit Suisse’s sharp decline shook a segment of the market already beset by two major bank failures in the past week.
Shares of the Swiss bank fell more than 27% after its biggest lender said it would not provide any further financial support. Credit Suisse announced on Tuesday that it had identified “material weaknesses” in its financial reporting process from previous years. Other European banks also slid, including an 8% decline for Deutsche Bank.
The move also appeared to affect major US banks. Wells Fargo and Citi shares each fell more than 4% in premarket trading, while Bank of America fell 3%. JPMorgan and Goldman lost more than 2%.
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Wells Fargo shares were under pressure on Wednesday.
Credit Suisse’s troubles follow the collapse of Silicon Valley Bank and Signature Bank in the US. Those collapses led to sharp sell-offs in regional bank stocks on Monday. The SPDR S&P Regional Bank ETF (KRE) fell more than 4% in premarket trading on Wednesday. Zions Bancorp and Western Alliance each fell more than 6%.
While Credit Suisse’s struggles appear to have nothing to do with US middle-market banks, the combination of the two problems could spark a broader scrutiny of the banking system among investors, according to Bleakley Financial Group’s Peter Boockvar.
“What this tells us is that there is the potential for just one big contraction in the loan rollover that the banks will initiate [to] Focus more on tightening balance sheets and not on lending,” Boockvar said on CNBC’s “Squawk Box.”
“It’s a balance sheet rethink that the markets have made. Also, with a lot of these banks, you have to wonder if they need to start going out and raising equity,” he added.
Along those lines, Wells Fargo filed Tuesday to raise $9.5 billion of capital through the sale of debt, warrants and other securities. The bank said the new money will be used for general corporate purposes.
The fallout from the collapse of the SVB could also lead to more regulation and rising costs for the US banking sector, including potentially higher fees for deposit insurance regulators.