Credit Suisse shares spike on reported State Street takeover interest

Credit Suisse shares ended up 3.8 per cent in Zurich after jumping following a report in Swiss financial website Inside Paradeplatz. PHOTO: AFP

MILAN (REUTERS) - Shares in Credit Suisse turned sharply higher on Wednesday afternoon (June 8), with traders citing an Inside Paradeplatz report that US-based asset manager State Street is planning a takeover bid for the troubled lender, though some in the industry doubt the claim.

Credit Suisse shares ended up 3.8 per cent in Zurich after jumping following the report from the Swiss financial website. From lows hit earlier in the day, the shares were up more than 14 per cent. The broader European stock market was down 0.7 per cent.

The stock had dropped close to its lowest in over 20 years earlier in the session after the company warned of a likely second-quarter loss as volatility hit its investment bank.

In the United States, State Street shares finished down 5.4 per cent at US$69.04. US-listed shares of Credit Suisse closed down 1 per cent at US$6.87.

Citing one unidentified source, Inside Paradeplatz said State Street would bid 9 Swiss francs a share, a premium of more than 30 per cent to Tuesday's closing price. That would value Credit Suisse at 23 billion francs (S$32.3 billion).

"We are not going to respond to an earlier news report," State Street said in a statement. "As we have previously discussed, we are focused on our pending acquisition of Brown Brothers Harriman's investors services business."

Credit Suisse declined to comment.

Analysts were sceptical.

"I would struggle to see why State Street would be the buyer of a global full service investment bank franchise," said Mr Michael Brown, an analyst at Keefe, Bruyette & Woods. "It extends beyond its core competency as an asset servicing and asset management firm."

State Street announced last September that it had agreed to buy investment bank Brown Brothers Harriman's investor services business for US$3.5 billion (S$4.8 billion) in cash, strengthening its hand in the battle to be the world's biggest custodian bank.

Jefferies analysts wrote that they saw the combination as "highly unlikely", citing State Street's pending deal to buy Brown Brothers Harriman's investor services business and the Swiss bank's legal and business challenges.

A top US brokerage, in a message to clients, questioned the rationale of any State Street interest for the Swiss bank, citing unclear synergies for the US custodian, along with the risk of capital costs, job cuts and litigation risks.

The deal speculation comes as Credit Suisse on Wednesday delivered a third consecutive quarterly profit warning.

The bank has described 2022 as a "transition" year in which it is trying to turn the page on costly scandals that brought a near total reshuffle of top management and a restructuring seeking to curtail risk-taking, particularly in its investment bank.

Its shares have lost nearly half their value since two of the biggest shocks, the collapse of US$10 billion in supply chain finance funds linked to Greensill Capital and a more than US$5 billion loss on the unwinding of trades by investment firm Archegos, hit the bank in March 2021.

Those blows prompted questions over whether the flagship Swiss lender, left vulnerable by scandals, could be challenged by investors demanding its break-up, or that its shrinking stock market value makes it a target for a foreign hostile takeover.

Top 10 shareholder Artisan Partners told Reuters last month that Credit Suisse should start looking for a new chief executive, the first major investor to publicly call for such a move.

Separately, sources told Reuters last week that Credit Suisse is in the early stages of weighing options to bolster its capital after a string of losses eroded its financial buffers.

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