The environment has become more damaging for European banks, but
cs -0.43%
Canary cannot be considered in a coal mine.
Swiss bank warned on Wednesday that There will be a loss in the second quarter In both your investment bank and the company as a whole. This was mostly attributed to the deteriorating macroeconomic background in its two major markets, Europe and Asia. While external factors may not have helped, Credit Suisse is also trying to dig itself out of a series of holes of its own making. Shares of the bank were hit harder than peers, falling nearly 6% in European morning trading, while the European banking average declined nearly 1%.
The economic landscape of Europe is clouded. Russia’s invasion of Ukraine And post-sanctions tours have exacerbated cost inflation, while also raising the possibility of fuel shortages. Tightening monetary policy should boost banks’ interest margins, but it also potentially widens credit losses, as evidenced by the opening up of support measures related to the pandemic and rising cost of living,
According to RBC, investment banking has been a boon in recent quarters, but fees for large global banks in April and May were half what they were last year and nearly a quarter lower than in the same period in 2019. And while Asian growth is relied upon by some large European banks, customer risk appetite continues to decline due to Beijing’s Common Prosperity Initiative and changes in technology and asset policy.
While many European lenders may struggle in this context, Credit Suisse also brings with it unknown problems. Swiss bank involvement in a string of scams inspired a strategic changeIts a risk culture, but there have been few clear signs of progress. Unexpected departure of board chairman Additional concerns brought in to drive the plan through. Repeated profit warnings have done little to rebuild confidence or assuage concerns that the bank’s revenue targets are overly optimistic.
The group must cut costs amid an industrywide battle for talent. There are also concerns that its missteps may have hurt its brand, although some key divisions offered net new asset flows in the first quarter. a glimpse of assurance,
The Swiss lender’s particular challenges are reflected in its discounted shares, which trade at about 0.4 times tangible book value, compared to an average of 0.7 for European banks. A Reuters news report last week of a possible capital increase, strongly denied by the bank, gave investors a reason to stop betting on a recovery. Now they have a fresh one.
write to Rochelle Toplensky rochelle.toplensky@wsj.com
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