Credit Suisse shares resumed losses on Friday, falling 8 percent, as investor confidence remained fragile after the $54 billion bailout the Swiss bank received this week from the Swiss National Bank, News.ro reported, citing Reuters.

Downgrades and a U.S. lawsuit on Thursday reversed part of the bailout provided by Switzerland’s central bank on Thursday.

Shares in Credit Suisse lost another 8% on Friday after two days of sharp swings, and its shares jumped 20% on Thursday after plunging 24% on Wednesday when its biggest investor said laws prevented him from increasing his stake in Swiss bank.

“In our view, the key question is whether investors are confident enough to stem the outflows in the coming days,” said Frederic Carriere, head of investment strategy at RBC Wealth Management.

While markets are relieved by the Swiss central bank’s intervention, confidence will remain very fragile, especially as investors are likely to worry about the potential economic consequences of aggressive monetary policy tightening by the European Central Bank (ECB),” she added.

Credit Suisse has recorded net outflows of more than $200 million from its U.S. and European managed funds since March 13, Morningstar Direct said.

On Thursday, DBRS Morningstar became the first global rating agency to downgrade the bank’s credit rating, downgrading it to ‘BBB’, which is still investment grade.

The head of Credit Suisse’s Swiss unit said late on Thursday that the new funding would allow the bank to continue with its recovery plan, although it may take time to restore customer confidence.

“We’re still a bit cautious, but there’s certainly more positive news for Credit Suisse,” said John Milroy, investment adviser at Ord Minnett.

In another sign that concerns about banking stress remain high, the ECB’s Supervisory Board convened an unscheduled meeting on Friday to discuss stress and vulnerabilities in the eurozone banking sector.

ECB supervisors were told that deposits at eurozone banks remained stable and the impact on Credit Suisse was minor, a source familiar with the meeting told Reuters.

Reference lines

Credit Suisse became the first major global bank to receive an emergency bailout since the 2008 financial crisis, fueling doubts that central banks can sustain aggressive interest rate hikes to control inflation.

On Thursday, the ECB continued to raise its key interest rate by 0.50 percentage points in an effort to bring inflation, currently at 8.5%, back to its 2% target.

The central bank said that the banks of the eurozone are in better shape than in 2008.

A $30 billion bailout of U.S.-based First Republic Bank also failed to calm the market, as investors remained concerned about cracks in the sector after two other mid-sized U.S. banks collapsed last week.

First Republic shares fell 27.5% on Friday.

Credit Suisse shares suffered their worst week since the start of the COVID-19 restrictions in March 2020, losing 25.5%.

Underscoring the feverish state of the markets, European banking shares fell nearly 3% on Friday and ended their heavy weekly losses, falling almost 12% in their biggest weekly drop in a year.

The banking sector has been reeling from last week’s collapse of US bank Silicon Valley.

Credit Suisse’s US shareholders sued the bank on Thursday, alleging it defrauded them by concealing problems with its finances.

Credit Suisse declined to comment on the lawsuit.

Swiss lawmakers on Friday vowed to prosecute those responsible for Credit Suisse’s problems and called on the bank to clean up its finances after years of scandals in an effort to contain the crisis and limit any damage to the country’s reputation. (News.ro)