Credit Suisse shares plunge 63%, UBS falls 13% as European banks battered in early trade

Shares in Credit Suisse fell over 63 per cent - below the deal price - while UBS Group shares were down 12.9 per cent. PHOTO: REUTERS

LONDON – Shares in European banks were battered in early trade on Monday following an unprecedented weekend that saw the historic state-backed rescue of Credit Suisse by UBS and a coordinated central bank effort to bolster the flow of cash around the world.

Shares in Credit Suisse fell over 63 per cent – below the deal price – while UBS Group shares were down 12.9 per cent.

This comes after an announcement that UBS is paying 3 billion Swiss francs (S$4.33 billion) for its rival in an all-share deal, a steep discount to Credit Suisse’s closing price on March 17.

An index of bank stocks was down 5.8 per cent at 0821 GMT.

Deutsche Bank dropped 10.9 per cent and Commerzbank was last down 8.5 per cent. French banks BNP Paribas and Societe Generale saw declines of around 8.2 per cent and 7.5 per cent, respectively.

Standard Chartered shares fell to bottom of the FTSE 350 index – down 7.7 per cent – while Natwest and Barclays fell 7.8 per cent and 7.4 per cent, respectively.

Asian markets had earlier sank after an initial rally, as investors became jittery after the focus shifted to the massive hit that some Credit Suisse bondholders would take under the UBS acquisition.

In Hong Kong trading, HSBC Holdings Plc sank 6.2 per cent, the most since Sept 2022, and Standard Chartered Plc slumped 6 per cent. In Singapore, local banks DBS, UOB and OCBC were also in the red.

Under the deal, holders of securities known as additional tier 1 bonds with a notional value of 16 billion francs (S$23 billion) will be wiped out, potentially sending the US$275 billion (S$369 billion) market for bank funding into a tailspin.

That is raising concern that banks will need to find new sources of capital if there is a loss of confidence in those securities, while lenders’ existing holdings of such debt issued by peers also may see a significant loss of value. 

“You’ve got a nasty deal with a long and uncertain execution,” said Mikael Jacoby, head of continental European sales trading at Oddo Securities in Paris. “In the banking sector, maybe some bottom fishers will buy stocks deemed as safe but globally it will be negative. REUTERS, BLOOMBERG

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