Credit Suisse leads gains in banking shares, for now

IGTV’s Jeremy Naylor asks whether this is just delaying what some believe is the inevitable, or is it a positive turning point for the entire banking sector?

(Video Transcript)

EU banking stocks up

European banking stocks have risen at the start of the day's trade today after the Swiss National Bank (SNB) stepped in late last night to try and stave off a crisis at Credit Suisse.

Let's take a look at the statement that we saw released yesterday at the Swiss regulator Finma last night said the Swiss National Bank insisted that there were no indications of a direct risk of contagion for Swiss institutions due to the current turmoil in the US banking market. The Swiss Central Bank said it will provide this liquidity backstop. We learned overnight that Credit Suisse will borrow up to 50 billion Swiss Francs.

Credit Suisse executives held talks with representatives from the SNP and Finma throughout yesterday's session.

Share price chart

If we have a look at what happened and what has happened this morning, this is Credit Suisse stock. The long-term picture you can see the big loss of market capitalisation and record lows yesterday and today we've got the stock opening up 23.8%. And this has given a little bit of a fillip to other stocks around the region.

Yesterday's losses were around about a third of the total value of the business. That puts today's move into some sort of context. But the significance, I think, here is we are already off the highs today with 20 minutes into the European trading day. But I think if you look at other areas of the markets, it's interesting to see what's been happening there as well.

FTSE 350

Big losses yesterday for the FTSE 350 banking sector. Today we do have a rise, though. This is a red candle because there was a gap up. We're still 2% up from the lows at the closing point we saw yesterday, which was at the 200-day moving average.

So I think what's going on here is the fact that the markets appreciate what the Swiss National Bank has done, the fact they provided this backstop. But I think in the longer term picture, we need evidence to suggest that there is not going to be a systemic risk that the banking sector is facing. And I think we're far away from that point at which investors believe that we're over the worst. I think possibly there could well still be the worse to come. And people ought to be vigilant to the potential downsides, not just for banking stocks, but for the entire global market.