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European banking risk remains under pressure despite Credit Suisse bailout

Date: June 3, 2023 Time: 23:30:19

The fear of a financial collapse like the one in 2008 continues to think about the market. Although it seems that the main world stock markets start the spring with some relief after the events of the last ten days, investors are betting on caution in order to avoid making false steps. Proof of this is that the CDS (Credit Default Swaps) of the five-year senior debt in euros are deflating, but they do not return to the levels of two weeks ago and, in some cases, they even rise.

This ratio, which measures the risk of non-payment, has skyrocketed in most of the large European and US banks since March 9 and, now that the waters seem to be back on track, the rate of decline is not as desired . The exception comes from UBS, whose CDS, far from remitting, have continued to rise in the last two days to 224.58 points this Tuesday. Although it is not a critical strip as it did with its new purchase (Credit Suisse) last week, far from stopping its rebound, it has climbed 50 points since last Friday, when it was publicly leaked that it was in talks to absorb its rival. .

However, this operation has caused the opposite effect in the acquired firm. The Credit Suisse CDS experienced a sharp drop yesterday, following the path that began last Friday, when they began to drop 1,000 points. Thus, with data at the close of Wall Street on Tuesday, almost 800 integers plummeted in a sample of the risk ball is now in its owner, who must face the remodeling of the investment banking area to align it with that of UBS , with a lower risk profile.

These abrupt behaviors set them apart from other large banks on the Old Continent, where, although CDS prices have fallen, they have not yet returned to the level recorded when the stock market crash occurred due to the fall of SVB Financial. This is the case of Unicredit, for example. The CDS of the Italian firm were reduced this Tuesday and stood at around 111 points, while at the beginning of the month they did not exceed the threshold of 100. Thus, it stands out from Intesa Sanpaolo, which stands at 89 points, recovering the level of March 9.

Under the magnifying glass of investors

Without taking into account the Swiss bank, none of the heavyweights register a worrying mark, although they remain above those recorded a few days ago. Along these lines, at Société Générale it fell to 88 points between Tuesday and June, when two weeks ago they barely reached 50, showing that the feeling of alertness has not completely returned. Something similar happens at BNP Paribas (69 points), HSBC (88 points), Deutsche Bank (142 points), Commerzbank (90 points) or Banco Santander (80 points). At Barclays, for its part, it also falls below the 100 barrier and touches 95 points.

In all of them the same pattern is repeated: a descent at slow speed. However, in the seven banks this magnitude remains below that registered in October of the fiscal year, when they marked annual maximums. Of the rest of the relevant entities such as ING, Lloyds or DNB Bank, which also seem to be out of danger, the timid recoveries stand out after the turbulent days with insignificant downward swings.

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.

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