Credit Suisse shares are higher on State Street’s reported takeover interest

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MILAN, June 8 (Reuters) – Shares of Credit Suisse (CSGN.S) were sharply higher on Wednesday afternoon, with traders citing a Inside Paradeplatz report that US-based State Street (STT.N) is planning a takeover bid for the troubled lender, although some in the industry doubt the claim.

Credit Suisse shares are up 3.8% in Zurich after skyrocketing following the report in the Swiss financial blog. From the lows hit earlier in the day, shares are up more than 14%. The broader European equity market (.STOXX) lost 0.7%.

The stock had fallen to nearly its lowest level in over 20 years earlier in the session after the company warned of a likely second-quarter loss as volatility hit its investment bank. Continue reading

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In the US, shares of State Street (STT.N) closed up 5.4% at $69.04. US-listed Credit Suisse shares closed up 1% at $6.87.

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

“We will not be responding to any previous news report,” State Street said in a statement. “As we previously discussed, we are focused on our upcoming acquisition of Brown Brothers Harriman’s Investors Services business.”

Credit Suisse declined to comment.

Analysts were skeptical.

“I have a hard time imagining why State Street would be the buyer of a full-service global investment bank,” said Michael Brown, an analyst at Keefe, Bruyette & Woods. “It goes beyond its core competency as an asset management and asset management firm.”

State Street announced last September that it had agreed to buy the investment services business of investment bank Brown Brothers Harriman & Co for $3.5 billion in cash to bolster its position in the battle to become the world’s largest custodian. Continue reading

Jefferies analysts wrote that they viewed the merger as “highly unlikely,” citing State Street’s pending deal to buy Brown Brothers Harriman’s investor services business and the Swiss bank’s legal and business challenges.

A leading US brokerage firm, in a note to clients, questioned State Street’s rationale for the Swiss bank, citing unclear synergies for the US custodian and the risk of capital costs, downsizing and litigation.

The deal speculation comes as Credit Suisse issued a third straight quarterly earnings warning on Wednesday.

The bank has described 2022 as a “transitional year” as it seeks to turn the page on costly scandals that have seen a near-complete reshuffle of top management and a reorganization to curb risk-taking, particularly at its investment bank.

Stocks have lost nearly half their value since two of the biggest shocks, the collapse of a $10 billion supply chain finance fund linked to Greensill Capital and a more than $5 billion loss from winding down deals through the investment firm Archegos, the bank met in March 2021. read more

Those beatings raised questions as to whether the scandal-vulnerable Swiss flagship could be challenged by investors demanding its dissolution, or whether its declining stock market value makes it a target for a hostile foreign takeover. Continue reading

Top 10 shareholder Artisan Partners told Reuters last month that Credit Suisse should begin searching for a new CEO, the first major investor to publicly call for such a move. Continue reading

Separately, sources told Reuters last week that Credit Suisse is in the early stages of considering options to boost its capital after a series of losses eroded its financial buffers. Continue reading

($1 = 0.9739 Swiss Francs)

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Reporting by Danilo Masoni; Additional reporting by Sinead Carew, Brenna Hughes Neghaiwi and Niket Nishant; Edited by Ira Iosebashvili, Elaine Hardcastle and Richard Chang

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