By Swissquote Analysts
Credit Suisse Resets with a Retreat from Wall Street
Topic of the day
Credit Suisse said it would raise $4 billion in fresh capital from a Saudi Arabian bank and other investors to fund a retreat from Wall Street and recover from a near-existential crisis. The Swiss bank said it would sharpen its markets trading businesses and rebrand its capital markets and advisory business as an independent unit called CS First Boston. Michael Klein, a board member who helped plan Credit Suisse’s latest pivot, will step down to become the new unit’s chief executive under the plan. The bank confirmed it is poised to transfer its securitized products group - a large business within the investment bank - to a consortium made up of Apollo Global Management and Pacific Investment Management. Christian Meissner, head of investment banking, is leaving the bank with immediate effect. Credit Suisse said the moves are aimed at channeling more of its assets and other resources into managing money for the world’s rich, which will continue to be its main business. It said its cost base should fall by around $2.5 billion from current levels to around $14.7 billion by 2025. Around $1.5 billion of the new shares will be bought by Saudi National Bank, Credit Suisse said, giving SNB up to a 9.9% shareholding. A rights issue for existing shareholders will run through November. Credit Suisse estimated the cost of the restructuring at around $2.9 billion over the next two years. The strategy changes came alongside Credit Suisse’s fourth consecutive quarterly loss. It posted a $4 billion net loss for the third quarter, largely because it had to impair the value of deferred tax assets to reflect the strategic plans.
Wednesday, the SMI edged up 0.4 per cent to 10,817 points. Among the 20 SMI stocks, there were 14 price gainers and six price losers. 35.99 (previously: 43.95) million shares were traded. The recent decline in market interest rates had a negative impact on the shares of banks and insurers. Credit Suisse and UBS declined by 0.5 and 1.1 per cent respectively. Credit Suisse will present figures on Thursday. Swiss Life slipped 0.2 per cent. Logitech (-0.8 per cent) saw profit taking. The shares had jumped by double digits on Tuesday after surprisingly good figures from the manufacturer of computer accessories. On the other hand, Novartis (+1%), whose shares had fallen slightly on Tuesday in response to the pharmaceutical company's financial results, was in demand. Roche, meanwhile, slipped by 0.3 per cent.
European stocks were mostly in positive territory on Wednesday, but gains were capped, as traders balanced hopes the Federal Reserve might soften its rate hike plans against some disappointing big tech earnings. Deutsche Bank (+1.2%) significantly increased its third quarter profit despite market turbulence and a slowing economy. The bank benefited from significantly higher earnings despite having to set aside more money for loans at risk of default. The bank is sticking to its target return of 8 per cent for 2022. Before taxes, it earned 1.6 billion euros in the period from July to September after 554 million in the same period last year. Deutsche Bank subsidiary DWS (-2.5 per cent) reported net inflows of 7.7 billion euros again in the third quarter after recent heavy net outflows. Meanwhile, profit fell due to higher costs. The adjusted cost/income ratio deteriorated to 63.5% from 59.2%. Unicredit (+4.3%) more than delivered, with its net profit in three months amounting to 1.71 billion euros, about 70 percent above analysts' estimates. Fresenius SE gained 4 percent. The share price continued to be driven by fantasies about Elliott Investment Management's interest in the company. Heineken slumped 5.4 per cent after third-quarter figures. In the case of Mercedes-Benz (+1.1%), the optimistic data and the increased outlook had met the market's consensus expectations, which had already risen in advance. Shares in Reckitt-Benckiser were under pressure in London after reporting figures and fell 4.1 per cent. This also weighed on Beiersdorf losing 1.5 per cent.
Falling tech stocks dragged down the S&P 500 on Wednesday after disappointing earnings reports from Google’s parent company and Microsoft. The S&P 500 fell 28.51 points, or 0.7%, to 3830.60. The tech-heavy Nasdaq Composite declined 228.12 points, or 2%, to 10970.99. The Dow Jones Industrial Average, meanwhile, added 2.37 points, or less than 0.1%, to 31839.11. Microsoft and Alphabet are among the most heavily weighted stocks in the S&P 500 because of their large market values, so declines in the shares have an outsize influence on the broad index’s moves. Shares of Alphabet dropped $9.55, or 9.1%, to $94.93 in their worst day since March 2020, according to Dow Jones Market Data. The company’s revenue growth last quarter dropped to the lowest level in more than two years and its YouTube video platform posted a drop in advertising sales for the first time. Microsoft shares declined $19.34, or 7.7%, to $231.32 after the company reported its weakest revenue growth in more than five years and said it expects a sharp decline in personal computer sales. Meta Platforms shares dropped in after-hours trading after the Facebook parent posted its second quarterly revenue decline in a row. Among other individual stocks, shares of Chipotle Mexican Grill dropped $107.99, or 6.8%, to $1476.03 after the burrito chain said inflation is wearing on some consumers. Boeing shares fell $12.86, or 8.8%, to $133.79 after the aerospace giant said its losses deepened in the third quarter, in part because of problems with its defense business. Hess shares, meanwhile, rose $6.54, or 4.8%, to $142.29 after the oil and natural gas company raised its production forecast for the year. The IPO of the Intel subsidiary Mobileye was a complete success. The first share price traded at 26.71 dollars, an increase of 27 per cent over the issue price of 21 dollars. At the close of trading, the share was quoted at 28.97 dollars.
Asian stocks were mixed on Thursday. The Hang Seng Index in Hong Kong adds 1.7 per cent. The Kospi in Seoul gained 1.4 per cent. Here, better-than-expected growth data are incentivising a buying mood. In contrast, the Nikkei-225 in Tokyo declines by 0.1 per cent. Canon slips 6.5 per cent following disappointing quarterly figures. In contrast, Capcom shares rise by 8.0 per cent after the video game developer raised its revenue and profit estimates for the full year. China’s Shanghai Composite edged 0.1% lower.
U.S. Treasury yields slipped on Wednesday, accompanied by a drop in the dollar and smaller-than-expected rate increase by the Bank of Canada, as recent soft U.S. economic data boosted hopes that the Federal Reserve might become less aggressive with hikes. The spread between rates on the 3-month bill and 10-year Treasury intermittently fell below zero, inverting that part of the curve and adding to worrisome signs of an impending U.S. recession. The 10-year Treasury note fell 10 basis points to 4.011%, after hitting a 14-year high in the morning. The 2-year Treasury note gave up 4 basis points to 4.42%.
JP Morgan lifts UBS target to CHF 20.70 (20) - Overweight
DZ Bank lowers Novartis target to CHF 91 (95) - Buy
Bank of America raises Air Liquide target to EUR 170 (160) - Buy
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