JP Morgan Chase & Co analysts predict Swiss Bank, the central bank of Switzerland, taking over Credit Suisse will likely solve its liquidity problem. They said the status quo is not an option, outlining three possible costs for Credit Suisse.
Credit Suisse’s capital position is fine. Still, the problematic “situation is related to the ongoing question of market confidence in the bank’s strategy and the ongoing erosion of the franchise,” JP Morgan’s Kian Abohusein said in a note on Thursday, as stated by Bloomberg.
Abohusein warned last month that the Credit Suisse franchise collapsed faster than expected, and the stock has since fallen 25 per cent. In October of last year, he estimated that the minimum value of the bank is around 15 billion dollars, and its current market capitalization is estimated at slightly less than 9 billion dollars.
The three scenarios for Credit Suisse elaborated by JP Morgan analysts include a takeover from the also Swiss UBS bank with the participation of the Swiss bank, an injection of capital or a full deposit guarantee by the Swiss central bank and the option of a “self-help approach” with the closure of the investment bank, which would give time to restructure Credit Suisse.
The bank expects help from the central bank
Bank of America analysts said they believe the support from the Swiss central bank is a clear message that it will continue in its current form. On Thursday, Ulrich Koerner, CEO of Credit Suisse, notified personnel in a memo that the bank will stay committed to its transformation.
Credit Suisse shares rose 40 per cent on Thursday after the Swiss National Bank guaranteed its liquidity with 50 billion francs.