FTSE 100 heads south; Credit Suisse drops 9% and First Republic falls despite bailout

© Reuters. FTSE 100 heads south; Credit Suisse drops 9% and First Republic falls despite bailout

Proactive Investors -

• FTSE 100 tumbles as worries over banks resurface
• US banks pump US$30bn into First Republic but share price falls
• ECB holds unscheduled meeting; Credit Suisse (SIX:CSGN) falls 9%

Funds continue to flow out of Credit Suisse

As clients withdraw their cash at a dizzying pace, net outflows from Credit Suisse’s US and European managed funds topped US$450mln between Monday and Wednesday, the data firm Morningstar Direct has calculated.

The Swiss bank manages more than 300 European funds.

Credit Suisse shares have dropped again today, sinking around 9% on the Swiss stock exchange despite the £44.5bn central bank lifeline aimed at restoring investor confidence.

Shares in Switzerland's embattled second-biggest bank were down trading at 1.84 Swiss francs.

Morningstar also showed that UK funds have a minimal exposure to Credit Suisse with Blackrock ACS Eurp ex UK ESG Insgts fund the most heavily exposed with a 0.22% weighting as at the end of January.

In Europe, the Merch-Oportunidades FI fund in Spain had the largest exposure by weighting – 7.93% as at the end of February.

US futures extend falls

US futures have extended their falls heading to the market open. Dow futures are now down 291 points, or 0.9%. S&P 500 futures have fallen 0.9% as well, and Nasdaq futures are 0.3% lower.

First Republic has slid 21% in the premarket despite gaining nearly 10% in Thursday’s session, when a group of banks said it would aid First Republic with US$30bn in deposits as a sign of confidence in the banking system.

US-listed shares of Credit Suisse were also down 10.5%.

Back in London and the FTSE 100 has stabilised at its lows for the day, down 48.95 points at 7,361.08.

First Republic down in pre-market; FTSE tumbles

The sea of green is in dander of being replaced by a sea of red. London's lead index has tumbled to its worst levels for the day, now at 7,356.46, down 53.57 points, or 0.72%.

Shares in First Republic Bank were down in pre-market trading in the US on Friday, despite the largest US banks coming together to deposit over $30bn to shore up its finances and prevent a third US bank collapse in a week.

First Republic stock was down 11.8 per cent to $30.23 in pre-market trading in New York, after closing up 10 per cent at $34.27 on Thursday.

The move suggests investors still have questions about First Republic, despite the rescue deal orchestrated by US Treasury secretary Janet Yellen, JPMorgan (NYSE:JPM) chief executive Jamie Dimon and Federal Reserve chair Jay Powell.

Billionaire investor Bill Ackman warned that the Fisrt Republic Bank default risk is being spread to the largest banks. “Spreading the risk of financial contagion to achieve a false sense of confidence in FRB is bad policy,” he said in a tweet. “The SIBs would never have made this low return investment in deposits unless they were pressured to do so and without assurances that FRB deposits would be backstopped if it failed. The market has responded to this fictional vote of confidence with a 35% after-market decline in FRB stock.”

ECB holds unscheduled meeting; Credit Suisse drops 10%

The European Central Bank held an unscheduled meeting of its supervisory board this morning to discuss stress and vulnerabilities in the eurozone banking sector after the recent selloff in bank shares, a spokesperson told Reuters.

The supervisory board, which directly oversees 111 lenders in the eurozone, normally meets every three weeks but held two impromptu meetings this week.

The spokesperson told Reuters: "The supervisory board is meeting to exchange views and to provide members with an update on recent developments in the banking sector."

Reuters reported, citing a source, that the purpose of the meeting was to monitor liquidity in the eurozone banking sector and watch for any vulnerability to a run on any bank, but the source did not expect the ECB to take any immediate action.

Banking shares have come renewed pressure with Credit Suisse now down 10%.

The Euro Stoxx 600 banks index was also lower, conceding gains, at 144.19, down 0.56, or 0.39%.

The FTSE 100 is now at 7,407.20, down 2.83 points.

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