Client Withdrawals

Shares in troubled French bank Credit Suisse are coming under fresh selling pressure this week as concerns build around large client withdrawals. Credit Suisse this week warned that it is facing a roughly $1.5 billion loss in Q4 as a result of withdrawals from major clients. The bank’s shares have been in decline all year and were only recently recovering from insolvency rumours, recovering off the roughly $3.79 lows. However, retracing the gap which opened up on Q3 earnings day, Credit Suisse shares have since turned lower again.

Litigation Costs

Alongside client outflows, the group noted that it was suffering high levels of litigation costs as a result of compliance failures. Looking ahead, the bank expects these costs to continue to hurt the group’s results. Additionally, these increased costs are fuelling an acceleration of the bank’s restructuring program.  

Chinese IB & Research Layoffs

On that note, the group also announced this week that it was laying off around one-third of Chinese investment bank staff. This is part of the group’s broader shift in strategy which will see it carving up its investment banking business into smaller sections. The announcement, alongside a roughly 50% reduction in research department staff, is also in response to slowing business in China.

Technical Views

Credit Suisse

The decline in Credit Suisse shares this year has been framed by a well- defined bear channel. The sell-off has recently stalled along support at the 3.77 level. While we’ve seen bullish divergence creeping in on momentum studies, the bear channel is holding for now and while price remains below the 4.97 level, the focus is on an eventual break lower. If bulls can get back above the 4.97 level, the focus will turn to the 5.94 level next.