Skip to comments.Credit Suisse Moves to Quell Capital Rise Fears (More x42 Cronies In Financial Trouble)
Posted on 10/04/2002 8:14:37 AM PDT by anymouse
ZURICH, Oct 4 (Reuters) - Credit Suisse (CSGZn.VX) insisted on Friday it was adequately capitalised, hoping to quash fears it might need to raise fresh capital which sent its ailing shares down over 15 percent to their lowest in over nine years.
"Due to the drop in its share price yesterday and today, Credit Suisse Group wishes to announce that it is not aware of any objective reasons prompting this development," Switzerland's second-largest financial conglomerate said in a brief statement.
"The group's present capital resources remain adequate, and as stated before, no capital increase of the group is planned," it added.
The statement helped CS shares pare earlier losses and by 1349 GMT they traded down 5.4 percent at 22.80 francs, after earlier falling as low as 20.10 francs. At that level the stock was down over 30 percent on the week, wiping some $8 billion of CS's market value.
Fears that Swiss financier Martin Ebner's heavily indebted BZ Group might unload its near five percent stake in CS had also weighed on the battered share, analysts said.
Specialty chemicals group Lonza (LONZn.VX) said Ebner would sell its almost 20 percent stake, prompting worries he might also sell stakes in other top Swiss companies, among them CS.
But some observers said the market reaction was overdone. "There is panic selling, but the bank is not in distress at all," said Jacques-Henri Gaulard, analyst at Merrill Lynch.
Traders said institutional sellers, among them investment bank JP Morgan (JPM), had been unloading large blocks of CS shares.
CS group's shrunken market capitalisation of less than 30 billion francs currently is below what most analysts say its flagship private banking franchise alone would be worth.
Yet CS's losses dragged down other bank shares as well.
Larger rival UBS (UBSZn.VX) was down 5.9 percent at 56.90 francs, also hurt by WestLB Panmure cutting its price target to 72 francs from 78, but maintaining an "outperform" rating.
Standard & Poor's warned this week it might downgrade CS's credit rating after CS pumped two billion francs into ailing Winterthur, said more funds might be needed to lift the insurer and signalled another hefty group loss in the quarter just over.
With the latest Winterthur injection financed from group cash, it will take away liquidity for other business purposes. CS already injected 1.75 billion francs into Winterthur in June.
Analysts say the group's capital base, while satisfying the regulatory minimum, does not leave the group much room to deal with potential problems stemming from its credit exposure, which is seen as significantly higher than that of some rivals.
"Adjusted capital remains tight and there is not much margin for error," analysts at Morgan Stanley said in a research note.
Yet any capital increase now would have to come at a large discount to market prices to entice investors to put money into the worst performing European bank stock this year.
Most analysts expect CS to report a third quarter net loss of more than a billion francs on November 14, adding to the second quarter's 579 million franc net loss.
CS has had a raft of problems recently, including the large investment losses at Winterthur to a legal spat in the United States where investment bank Credit Suisse First Boston is accused of improperly allocating hot stocks in the late 1990s.
CS said last month Chairman and Chief Executive Lukas Muehlemann, who pushed an ambitious expansion strategy into insurance and investment banking that turned sour when markets headed south, will step down at the end of the year.
He will be succeeded by Oswald Gruebel, head of CS's financial services division which includes insurance, and John Mack, the head of CSFB, who has made a name for himself by slashing thousands of jobs at the high-cost unit. (Additional reporting by Thomas Atkins)
Eating their own now.
I see it as a good sign -- a very good sign. Let the scam artists and crooks do themselves in with their own greed and lack of ethics. The system must be cleared of the trash.
We will be much stronger as a people and country once we rid ourselves of the parasites. If we wait for them to suck us dry and destroy our will and character as well as steal the national wealth, then the future will indeed be dim.
On the social/political side, there's a problem. The last time around it was totalitarianism through Communism and Fascism. This time around it is Islamism and the leftovers of Marxism. If there isn't a threat, there isn't a problem.
I'm not necessarily a big cycle fan, but if you want to buy the poetry of the cycle mode of thought, you'd look for an extended economic slow-down world wide (note that Japan's stock market hit a 19 year low yesterday) lasting another couple of years, followed by political turbulence on a very large scale.
My happy thoughts for the day.