Credit Suisse shares rise with interest reported on State Street

The Swiss bank Credit Suisse logo appears at its headquarters on Paradeplatz in Zurich, Switzerland, October 1, 2019. REUTERS/Arnd Wegmann

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MILAN, June 8 (Reuters) – Shares in Credit Suisse (CSGN.S) Turned sharply higher on Wednesday afternoon, as traders reported that Inside Paradeplatz Report That State Street based in the United States (STT.N) He plans to offer a buyout to the distressed lender, although some in the industry are skeptical of the claim.

Credit Suisse shares closed 3.8% higher in Zurich after jumping following the report in the Swiss financial blog. From their lows earlier in the day, shares are up more than 14%. The broader European stock market (.stoxx) It decreased by 0.7%.

The stock had fallen near its lowest levels in more than 20 years earlier in the session after the company warned of a potential second-quarter loss due to volatility affecting its investment bank. Read more

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In the United States, State Street Corporation shares (STT.N)Recently nearly 5%, the performance of less than the broader market.

Citing an unidentified source, Inside Paradeplatz said State Street will offer 9 Swiss francs per share, a premium of more than 30% over Tuesday’s closing price. This would value Credit Suisse at 23 billion francs ($23.6 billion).

“We will not respond to an earlier news report,” State Street said in a statement. “As previously discussed, we are focused on our pending acquisition of the Brown Brothers Harriman Investor Services business.”

Credit Suisse declined to comment.

Analysts were skeptical.

“I would be hard pressed to see why State Street is the buyer of a global full-service investment bank franchise,” said Michael Brown, analyst at Keefe, Bruyette & Woods. “It goes beyond their core competencies as an asset service and asset management company.”

State Street announced last September that it had agreed to buy the investor services business of investment bank Brown Brothers Harriman & Co. for $3.5 billion in cash, bolstering its clout in the battle to become the world’s largest trusted bank. Read more

Jefferies analysts wrote that they saw the merger as “highly unlikely” citing State Street’s pending deal to buy Brown Brothers Harriman’s investor services business and the Swiss bank’s legal/commercial challenges.

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

Speculation about the deal comes as Credit Suisse on Wednesday delivered its third consecutive quarterly earnings warning.

The bank described 2022 as a “transitional” year in which it is trying to turn the page on costly scandals that have led to an almost complete overhaul of senior management and restructuring to reduce risk, particularly in its investment bank.

Stocks have lost nearly half their value since two of the biggest shocks, the $10 billion collapse in supply chain funds linked to Greensill Capital and the loss of more than $5 billion from divestitures by investment firm Archegos, hit the bank in March 2021. Read More

These strikes have raised questions about whether the major Swiss lender, left vulnerable to scandals, could be challenged by investors who are calling for its dissolution, or its diminishing value in the stock market could make it a target of hostile foreign takeovers. Read more

Artisan Partners, one of the top 10 shareholders, told Reuters last month that Credit Suisse should begin the search for a new CEO, the first major investor to publicly call for such a move. Read more

On the other hand, sources told Reuters last week that Credit Suisse is in the early stages of studying options to boost its capital after a series of losses that eroded its financial margins. Read more

(dollar = 0.9739 Swiss francs)

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(Reporting by Danilo Masoni). Additional reporting by Sinead Karo, Brianna Hughes-Nigaiwe and Nikit Nishant. Editing by Ira Yosibashvili, Elaine Hardcastle and Richard Chang

Our criteria: Thomson Reuters Trust Principles.

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