Credit Suisse (CS)
Credit Suisse shares have dropped again this Friday, sinking nearly 11% on the Swiss stock exchange despite the £44.5bn central bank lifeline aimed at restoring investor confidence.
The head of Credit Suisse’s Swiss banking division, André Helfenstein, said the cash would allow the bank to carry on with its overhaul, but admitted it would take time to win back client confidence.
However, that might be a near impossible task as worries about Switzerland’s second-biggest bank remain.
“Whether depositors are sufficiently reassured to stem outflows over the next few days is a key question, in our view,” Frédérique Carrier, head of investment strategy in the British Isles at RBC Wealth Management, said.
Meanwhile, US investors in Credit Suisse have hit the beleaguered Swiss bank with legal action, claiming that it overstated its prospects before this week’s shares crash.
First Republic (FRC)
First Republic, a regional US lender, was among those to have seen its share price collapse this week amid sector-wide balance sheet scrutiny prompted by the collapse of Silicon Valley Bank (SIVB) last Friday.
A group of 11 major banks clubbed together to provide $30bn (£24.7bn) of cash in an attempt to end a crisis of confidence surrounding the the nation's 14th-largest bank.
After the failure of two US banks in the past week – Silicon Valley Bank and Signature Bank – investors have been worried that other banks could also collapse.
US regulators stepped in at the weekend to ensure that customers at SVB and Signature Bank had full access to their money.
Despite the Wall Street rescue, there are signs that not all worries have been eased.
Shares in First Republic dropped 20% in after-hours stock market trading after the bank said its was suspending its dividend "during this period of uncertainty".
Away the banking sector turmoil, oil major Shell has surged on the back of higher oil prices.
Crude prices firmed after a meeting between Saudi Arabia and Russia calmed markets amid strong China demand expectations.
BP's (BP.L) shares rose this week despite, a US federal investigation finding that a BP subsidiary violated workplace safety practices, leading to the deaths of two workers.
The investigation concerns an incident that caused fatal burns to two workers in an Oregon, Ohio refinery's crude unit, operated by BP Products North America. The regulator proposed a fine of $156,250.
Market movers next week
As we approach the end of “one of the more fraught weeks in financial markets since the GFC”, as Jim Reid from Deutsche Bank puts it, markets can’t say it is all over now.
It will be impossible for markets to ignore the banking turmoil on both sides of the continent and with a lot of doubts about Credit Suisse and the exposure of other banks to the Silicon Valley crash, banking stocks are set to be under pressure next week.
If investors can find any time away from looking at the banking turmoil, the US Federal Reserve will announce its decision around interest rates on Wednesday.
Expectations are swinging wildly as the events at Silicon Valley Bank and Credit Suisse have thrown in a curveball. But expectations are settling on a 0.25% hike in the Fed Funds rate to 5%.
“As if they did not have enough with which to contend in the face of fighting inflation on one hand and fending off recession on the other, central banks must now confront the failure of Silicon Valley Bank and any wider implications that has for the banking system, given that higher interest rates have played some role in putting the squeeze on that bank’s customers and then ultimately the bank itself.
"We will find out just how perturbed officials are – if indeed they are perturbed at all – when the US Federal Reserve takes its latest monetary policy decision next Wednesday,” Russ Mould, AJ Bell investment director, and Danni Hewson, AJ Bell head of financial analysis, said.
In the UK, investors will focus on the Bank of England’s own interest rate decision, on Thursday.
Inflation forecasts are saying the rise of prices will slow down before the end of the year to around 3% from the current double digit high of 10.1% so markets are hoping the central bank will hold rates at 4%.
But there have been hawkish views from inside the Bank's Monetary Policy Committee that suggested there was still room to increase rates to bring down inflation to 2%.
“For the moment, markets think the Bank of England will stand pat at 4.00% at its March meeting and then eke out one more quarter-point rise to 4.25% before ending this rate-hiking cycle.
"A first cut back to 4% is the current expectation by year end but, again, how markets take any reversal of policy is now more open to doubt, especially if financial market or banking instability or a deeper-than-expected economic slowdown push policymakers into a corner and oblige them to cut rates even if inflation is proving sticky,” Mould and Hewson said.
On the companies’ results front, Kingfisher (KGF.L) is the one to look out for.
Watch: Bank rescues ease crisis fears... for now