Credit Suisse: Dax loses only one percent, bank shares collapse – economy

Perhaps it is part of the irony of history that it was the boss of an armaments company who opened the Frankfurt Stock Exchange that morning. Armin Papperger, head of Rheinmetall’s tank builders, swung the golden exchange bell and smiled. On a day when others had little to smile about. And suddenly the financial world is talking about lines of defense and bazookas again.

After the weekend rescue of the staggering CreditSuisse Thanks to the major Swiss bank UBS, traders had also prepared themselves, at least mentally. This start of the week should be wild, and at the same time one of the most important in a long time. The concern is that if bank prices continue to fall, confidence could erode even further. Only in the previous week had the Credit Suisse share price finally made many customers really nervous.

At the beginning of trading, it became apparent how ambivalent the stock market was about the Swiss rescue operation. The leading German index fell more than one percent at the start of trading, Commerzbank shares fell by six percent and Deutsche Bank shares by 8.5 percent. “Had the bank not been saved, much worse would have happened,” says banking professor Wolfgang Gerke from the Bavarian Financial Center.

Credit Suisse titles fell on the Swiss stock exchange at the opening of trading by 62 percent, were not even quoted at 0.69 francs – mind you, less than the takeover price of 0.76 francs. Many investors apparently sold the shares at any price and just wanted to throw them out of their portfolios. Some of the bank’s shareholders were probably annoyed that they were not even asked about the takeover deal as shareholders, and some even spoke of “expropriation”. Presumably, without the rescue, the consequences would have been even more serious – also for the bank’s share price.

“The stock market is now wondering whether there are other similar banks in the market”

In view of the large number of bank stocks on the stock exchange, investor sentiment was mixed in the morning. On the one hand, central banks, financial supervisors and deposit insurance systems have so far successfully tried to counteract a domino effect in the financial system. On the other hand, the example of Credit Suisse also shows how quickly bank stocks can become almost worthless when in doubt. “That could keep some from investing in bank stocks, at least in the longer term,” says stock market expert Thomas Altmann from the fund company QC Partners. At the same time, regulation of the banks is likely to become more stringent in the coming months, increasing the costs for the banks – and depressing share prices. The bank stocks were also at the bottom of the leading German index.

Much more interesting than the emotional start to trading, however, is where the titles level off over the day and close in the evening. Investors are focusing in particular on US regional banks. Shares in the troubled US bank First Republic also fell by 17 percent at the start of trading on the Frankfurt Stock Exchange. “The stock market is now wondering whether there are other similar banks on the market,” says finance professor Wolfgang Gerke.

While the worries on the financial market are unbroken, investors looked for supposedly safe havens at the start of trading and bought, among other things, the (proverbial) crisis metal gold. The price of a troy ounce increased and exceeded the 2000 dollar mark for the first time in about a year. One could say: The precious metal turned out to be a crisis indicator this morning, and a brighter one at that.