Credit Suisse Weaknesses in Internal Controls Carries Negative Governance Implications
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On Tuesday, Credit Suisse dropped by almost 0.8 per cent. The major bank had admitted to considerable weaknesses in financial reporting over the past two years and at the same time confirmed that the outflow of funds was continuing. Here, the major shareholders from the oil states could intervene in a stabilising manner, traders commented. Credit Suisse published its annual report on Tuesday, which had been postponed. The report reveals pay cuts for the top managers of the ailing bank after the miserable financial year 2022, but they will receive financial incentives for a successful restructuring of the bank. According to the remuneration report, CS will pay its management a total of CHF 32.2 million in compensation for the heavily loss-making financial year 2022, compared to CHF 38.1 million for the previous year. As announced, the managers will forego variable compensation. CS CEO Ulrich Körner, who took over the chief executive position at the beginning of August, is compensated with CHF 2.5 million for the past year, as can be seen in the compensation report. Before his appointment as CEO, he headed the Asset Management Division. His predecessor Thomas Gottstein had still earned 3.8 million Swiss francs in 2021. The total remuneration of the Board of Directors between the 2022 and 2023 Annual General Meetings amounts to CHF 10.4 million compared to CHF 11.7 million. Chairman of the Board Axel Lehmann earns a total of CHF 3.2 million. He waives his chairmanship compensation of 1.5 million francs, as can be seen in the compensation report. Credit Suisse closed the year 2022 with an annual loss of 7.3 billion. In addition, it had to accept outflows of client assets totalling around 123 billion francs, a large part of which occurred in the final quarter.
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On Tuesday, the Swiss stock market recovered from the previous day's losses. The SMI gained 0.8 per cent to 10,717 points. Among the 20 SMI stocks, there were 15 price gainers and five price losers. 106.73 (previously: 152) million shares were traded. While financial stocks in Europe rebounded after the turmoil surrounding the US bank SVB and in Switzerland UBS (+3.5%) and Julius Baer (+1.0%) rose, Credit Suisse lost 0.8 per cent and marked another record low. At Roche (+0.5%), the AGM went off without a hitch, with shareholders waving through all proposals. Schindler (+2.4%) benefited from a positive analyst commentary by UBS. According to UBS, the company succeeded in stabilising the declining order trends. The business figures of Flughafen Zürich (+1.5%) were well received. The company exceeded consensus expectations, according to Citi. Meanwhile, other companies also presented business figures: Tecan (+3.8%), Lalique (+3.3%), BKW (+0.8%), Newron (+10.1%) and SF Urban Properties (+1.7%) were convincing, while Medartis (-3.1), Sensirion (-2.3%), Crealogix (-1.8%) and Komax (-9.8%) were not. Polypeptide (-18.3%) reported a weaker 2022 performance.
After two sessions of sharp declines, European stock markets rallied on Tuesday as inflation slowed in the United States in February and concerns regarding the bankruptcy of US groups Silicon Valley Bank (SVB) and Signature Bank eased. The Stoxx Europe 600 index closed up 1.5% at 449.6 points. In Paris, the CAC 40 and the SBF 120 gained 1.9% and 1.8% respectively. The DAX 40 index in Frankfurt climbed 1.8%, while the FTSE 100 in London advanced 1.2%. After the turmoil caused by the collapse of SVB and Signature Bank in the US, French banks recovered. In Paris, Société Générale and BNP Paribas recorded gains of 2.3% and 3.1%. For its part, Crédit Agricole SA added 1%. Real estate company Icade (+4.7%) signed an exclusive agreement with French property manager Primonial REIM to sell its stake in its healthcare company, Icade Santé, in several stages. Retail group Casino (+7.3%) announced a further reduction of its stake in the Brazilian cash & carry chain Assai to speed up its deleveraging. Stifel raised its target price for electronic label specialist SES-imagotag (+7.3% to EUR 111.20) from EUR 160 to EUR 175, while maintaining its "buy" recommendation. German carmaker Volkswagen (-1.6% in Frankfurt) declared on Tuesday that it would invest 180 billion euros between 2023 and 2027 to expand in North America and China.
Bank stocks climbed and Treasury yields rose Tuesday, as some traders anticipated that financial-sector distress could remain contained and leave the Federal Reserve free to focus on tackling inflation. Trading steadied compared with Monday’s stormy session, which brought a deep rout for bank stocks and a rally for government bonds. Over the past week, the collapse of Silicon Valley Bank and the shutdowns of Signature Bank and Silvergate Capital heaped new fears of financial strain on top of investors’ yearlong preoccupation with inflation. The S&P 500 rose 63.53 points, or 1.6%, to close at 3919.29. The Dow Jones Industrial Average added 336.26 points, or 1.1%, ending at 32155.40, and the tech-centric Nasdaq Composite climbed 239.31 points, or 2.1%, to 11428.15. The KBW Bank index rose 2.60 points, or 3.2%, to 84.07, bouncing higher after a brutal few days for the sector. As the anxiety rippling through the banking sector began to ease, investors reversed some of their more dire bets from a day earlier. Some bank stocks recovered sharply. First Republic Bank, which came under pressure over the weekend, climbed $8.42, or 27%, to $39.63. Charles Schwab gained $4.77, or 9.2%, to $56.68 and KeyCorp rose 79 cents, or 6.9%, to $12.17. Zions Bancorp, which has also faced investor scrutiny, rose $1.34, or 4.5%, to $31.31. Consumer-price-index data out Tuesday showed that headline prices rose by 6% annually in February, cooling for an eighth consecutive month. United Airlines stock fell $2.62, or 5.4%, to $46.21 after the Chicago-based carrier warned that it expects a first-quarter loss. Shares of Facebook parent Meta Platforms climbed about $13.12, or 7%, to $194.02 after the company said it would cut an additional 10,000 jobs. Meta’s market value topped $500 billion for the first time since June, after peaking at $1.078 trillion in September 2021.
Stock markets in East Asia recoup some of their recent losses on Wednesday, after the US stock markets rallied vigorously the previous day. In Shanghai, the Composite Index climbs 0.7 per cent. The Hang Seng Index in Hong Kong adds 1.3 per cent. Technology stocks record above-average price gains in the wake of their US counterparts. Among others, Baidu rose by 4.3 per cent and Netease by 3.4 per cent. In Seoul, South Korea, the Kospi is up 1 per cent. In Tokyo, the Nikkei 225 index abandoned initial gains and traded little changed. Financial stocks are in demand as concerns about the US banking sector have eased. Mitsubishi UFJ advanced by 5 per cent and Dai-ichi Life by 2.1 per cent.
U.S. bond yields soared on Tuesday after February’s consumer-price index showed little sign of progress on inflation, giving the 2-year rate its biggest advance in more than a month. The 2-year Treasury note recovered 24 basis points to 4.225%. The rate had fallen on Monday for the first time since 1987, as investors revised their expectations for Fed rates downwards due to the turmoil in the banking sector. The 10-year Treasury note gained 10 basis points to 3.678%.
UBS raises Schindler target to CHF 275 (265) - Buy
CS lowers Telefonica Dtld to Neutral (Outperf.)/Target EUR 3.10
LBBW lifts Generali target to EUR 21 (20) - Buy
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