Credit Suisse shares rise with interest reported on State Street

The Swiss bank Credit Suisse logo appears at its headquarters on Paradeplatz in Zurich, Switzerland, October 1, 2019. REUTERS/Arnd Wegmann

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MILAN (Reuters) – Shares in Credit Suisse (CSGN.S) turned sharply higher on Wednesday afternoon, as traders cited an Inside Paradeplatz report that US-based State Street Corporation (STT.N) is planning a takeover bid for the troubled. Lenders, although some in the industry are skeptical of the claim.

Credit Suisse shares closed 3.8% higher in Zurich after jumping following the report in the Swiss financial blog. From their lows earlier in the day, shares are up more than 14%. The broader European stock market (.STOXX) was down 0.7%.

The stock fell near its lowest levels in more than 20 years during the session after the company warned of the possibility of a second-quarter loss due to volatility that affected its investment bank. Read more

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Shares in State Street (STT.N) are down more than 5%, underperforming the broader market.

Citing an unidentified source, Inside Paradeplatz said State Street will offer 9 Swiss francs per share, a premium of more than 30% over Tuesday’s closing price. This would value Credit Suisse at 23 billion francs ($23.6 billion).

“We will not respond to an earlier news report,” State Street said in a statement. “As previously discussed, we are focused on our pending acquisition of the Brown Brothers Harriman Investor Services business.”

Credit Suisse declined to comment.

Analysts were skeptical.

“For many reasons, we view this combination as highly unlikely,” Jefferies analysts wrote, citing State Street’s pending deal to buy Brown Brothers Harriman’s investor services business and the Swiss bank’s legal/commercial challenges.

A major US brokerage, in a letter to clients, questioned the rationale for any State Street interest for the Swiss bank, citing the unclear synergies of a US depository, along with the risks of capital costs, job cuts and litigation risks.

Speculation about the deal comes as Credit Suisse on Wednesday delivered its third consecutive quarterly earnings warning.

The bank described 2022 as a “transitional” year in which it is trying to turn the page on costly scandals that have led to an almost complete overhaul of senior management and restructuring to reduce risk, particularly in its investment bank.

Besides the challenges of the macroeconomic environment, Credit Suisse is seeking an overhaul after a series of setbacks that have shaken investor confidence.

Artisan Partners, one of the top 10 shareholders, told Reuters last month that Credit Suisse should begin the search for a new CEO, the first major investor to publicly call for such a move. Read more

On the other hand, sources told Reuters last week that Credit Suisse is in the early stages of studying options to boost its capital after a series of losses that eroded its financial margins. Read more

(dollar = 0.9739 Swiss francs)

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(Reporting by Danilo Masoni). Additional reporting by Nikit Nishant. Editing by Ira Yosibashvili, Elaine Hardcastle and Richard Chang

Our Standards: Thomson Reuters Trust Principles.

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