Banking Sector Challenges: Credit Suisse Borrows $54 Billion, First Republic Bank Downgraded, Goldman Sachs Cuts 2023 Growth Forecast
Credit Suisse announced Wednesday that it would borrow up to 50 billion Swiss Francs ($53.7 billion) from the Swiss National Bank in order to strengthen liquidity. Investors sent shares in the second biggest Swiss lender crashing by as much as 30% Wednesday.[0] The move comes amid turmoil in the banking sector, and has caused volatility on Wall Street.[1]
The lender said it would use an option to borrow as much as 50 billion Swiss francs ($54 billion) from the country’s central bank. At the opening of trading, shares of Credit Suisse soared by 32%, in reaction to the Swiss banking giant's announcement that it will acquire 50 billion francs ($54 billion) from the central bank and commence an offer to purchase distressed debt.[2]
Prior to U.S. markets opening, the European Central Bank is expected to declare its most recent policy decision.[3] The expectation was that the ECB would raise interest rates by 50 basis points until a few days ago.[4] It is now more probable that a quarter-point change will take place.[4] Prior to the Federal Reserve policy gathering next week, the European Central Bank has taken a decision, with the possibility of Fed rate increases being uncertain.[4]
FRC is said to be examining possible choices, one of which is to put itself up for sale.[4] Prior to the market open, FRC shares dropped by 30%, causing other regional banks to decline as well.[4] On Wednesday, First Republic stock plummeted by 21% after S&P Global drastically reduced its credit rating by four grades to become a non-investment grade.[4]
On Wednesday, economists at Goldman Sachs decreased their 2023 economic growth projection by 0.3 percentage points, setting it at 1.2%.[5] The withdrawal of loans from small- and medium-sized banks, as well as the instability in the overall financial system, was also noted.[6]
The banking sector is facing significant challenges, as Credit Suisse seeks a loan from the Swiss National Bank, First Republic Bank's credit rating is downgraded and Goldman Sachs lowers its 2023 economic growth forecast. Investors are paying close attention to the decisions of the European Central Bank and the Federal Reserve, as they weigh the risks and opportunities of the current economic environment.
0. “Latest on global stock markets: Live updates” CNN, 16 Mar. 2023, https://www.cnn.com/business/live-news/stock-market-credit-suisse-svb-banking-collapse-03-16-23/h_77a91f64213a9b6994e0c10b7499785f
1. “First Republic, Credit Suisse, Snap, Adobe, Proterra, and More Market Movers” Barron's, 16 Mar. 2023, https://www.barrons.com/articles/stock-market-movers-350a5c
2. “Credit Suisse shares jump as Swiss banking giant says it will borrow from SNB and buy back debt” MarketWatch, 16 Mar. 2023, https://www.marketwatch.com/story/credit-suisse-shares-jump-after-saying-it-will-borrow-from-snb-and-buy-back-debt-27a46b20
3. “European markets cautiously higher; Credit Suisse soars after central bank backstop” CNBC, 16 Mar. 2023, https://www.cnbc.com/2023/03/16/european-markets-live-updates-stocks-data-news-and-earnings.html
4. “Dow Jones Futures Fall: Credit Suisse Taps Swiss National Bank; First Republic Dives On Sales Report | Investor's …” Investor's Business Daily, 16 Mar. 2023, https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-rise-as-credit-suisse-taps-54-billion-from-swiss-national-bank/
5. “Credit Suisse Gets A Lifeline – Academy Sports (NASDAQ:ASO)” Benzinga, 16 Mar. 2023, https://www.benzinga.com/markets/cryptocurrency/23/03/31379378/credit-suisse-gets-a-lifeline
6. “A recession could come sooner on cooling bank lending” CNBC, 15 Mar. 2023, https://www.cnbc.com/2023/03/15/a-recession-could-come-sooner-on-cooling-bank-lending-.html
