Shares of embattled Swiss bank Credit Suisse extended gains on Monday, marking a third straight day of gains. The stock rally sustained momentum on reports that bidders are expressing interest in buying its securitized products unit.
Credit Suisse stock rose 3.7 percent to 4.61 Swiss francs on Monday, marking an 18 percent rise after dropping to its record closing low at the end of September.
Bloomberg News reported on Monday that Pimco, Sixth Street and a group linked to Centerbridge Partners have lined up bids for Credit Suisse's securitized products business.
The news comes as a welcome break for the Swiss wealth banking giant, which was rocked by a series of financial scandals. The bank was teetering on the edge last week, raising fears that its putative collapse would create a Lehman Brothers-like crisis in the financial industry. Amid a torrid plunge in market value and an unprecedented liquidity crisis, the bank was seen perilously close to failure, with options such as a merger with rival UBS mooted as a way out.
Credit Suisse had a market capitalization of $22.3 billion just a year ago. The value crashed to just about $10 billion at the end of September, even as shares plunged 56 percent in one year to $3.98. Even after Monday's rally, the shares are still down some 50 percent year-to-date.
On October 8, Credit Suisse tried to allay fears over liquidity by announcing it would buy back up to $3 billion of its own debt. The bank's shares rose following the announcement as the proposed buyback will trim its debt burden. The buyback offer included euro and pound sterling debt securities worth up to 1 billion euros ($980 million). The other component of the package is an offer for US dollar securities up to $2 billion.
While the report is welcome news, there's doubt over how much a sale might fetch, according to Vontobel analyst Andreas Venditti. Given market conditions and the fact that Credit Suisse is a "forced seller at the moment," Venditti is "pretty sure they're not going to get the highest bids one would wish for in this environment," he said by phone.
A sale of the unit may provide an additional positive catalyst for Credit Suisse, which last week offered to buy back up to $3 billion of its own debt, in a move aimed at calming frayed investor nerves.
Credit Suisse has said it will unveil a recovery plan on October 27. CEO Ulrich Korner had tried to calm frayed nerves saying that the bank has a plan to set it back on the rails. "I am conscious that there is lots of uncertainty and speculation both outside and within the company ...While you will appreciate that I am unable to share details of our transformation plans before October 27, I also want to make sure that you hear from me directly during this challenging period. I will therefore be sending a regular update to you all until then," the CEO said.
