Shares were trading 7% higher following the news Friday. However, they remain 50% lower year to date.
Although rising credit risk among European banks may bring back memories of the 2008 Global Financial Crisis, analysts have stressed that capital buffers are now significantly higher.
MSCI Research highlighted in a note Thursday that although high in historical context — particularly for Credit Suisse and Deutsche Bank
— the volume of credit-default swaps does not yet indicate imminent sector-wide default.
“Inversion of the curve would reflect investors’ short-term default concerns, and this was observed in 2008 across banks. Credit Suisse is the only major bank for which the curve has recently flattened,” MSCI Research Executive Directors Gergely Szalka and Thomas Verbraken noted.
“A standard model using current CDS pricing shows a market-implied six-month default probability of approximately 2% and 1% for Credit Suisse and Deutsche Bank, respectively, and a five-year default probability of 23% for Credit Suisse and 17% for Deutsche Bank.”
