The international financial institution, Credit Suisse is getting into more trouble as the non-stop outflow of clients might spark takeover speculations in the market. According to analysts at JPMorgan Chase, the continuing instability in Credit Suisse is likely to cause speculations regarding mergers or acquisitions. Such speculations might be counterproductive for the financial institution, which will force it to sell any Domestic unit or arm.
“However, should outflows be ongoing … M&A speculation (is) likely to increase and may lead to an IPO of the CS Schweiz legal entity worth an estimated 14 billion francs, full closure of the investment bank, and retaining wealth management and asset management in the NewCo,” JPMorgan Chase told its clients through a note.
Credit Suisse has been going through financial and legal difficulties for the last few months, mainly due to a large outflow of assets and deposits. Back-to-back lawsuits and legal issues related to money laundering in the home country of Switzerland itself, severely impacted the confidence of investors.
Clients of the wealth management division of Credit Suisse began withdrawing their deposits in a large amount. Day by day, the number of withdrawals is increasing, pushing the financial institution into a financial crisis.
According to analysts, clients of Credit Suisse will withdraw at least 85 billion dollars from the wealth management division in the fourth quarter of the current financial year. Overall, the financial institution will suffer a total withdrawal of more than 110 billion dollars. As of November 11, 2022, the total withdrawal was standing at 84 billion.
Withdrawal of deposits by clients is going to have more impacts on the final balance sheet as income from interests and other related revenue streams will dry up fast. This will have also effects on investment business.
The investment arm of the company also suffered major losses in the last few quarters as several investments ended up in loss. The sale of stocks and holdings in various businesses also put pressure on the investment arm of Credit Suisse.
The stock market condition of Credit Suisse also does not look good as the stock has plunged by more than 65 per cent in the current year. There are also reports that Credit Suisse is planning to raise 4 billion Swiss Francs in order to stabilize the financial situation.