Another bank bites the dust. Is the European banking crisis over for this time around? If it is, what assets look oversold?
Game over for Credit Suisse bond holders
According to Danske Bank, the Swiss bank, Credit Suisse (CS), remained solvent. Yet a run on the bank caused it to collapse, as the bank could not honour withdrawals.
Risking the savings of millions of savers and corporations, the Swiss government and the country’s biggest lender, UBS, agreed to bail out Credit Suisse’ clients over the weekend. However, holders of Credit Suisse’s AT1 bonds were wiped out, amounting to a loss of approximately $17 billion. The wipe-out of those investors sends fears throughout the banking sector, as other banks have issued the same type of bond. To reassure the market, the European Central Bank issued a statement to reassure that holders of AT1 bonds of Eurozone banks would not face the same fate.
Barclay’s Bank
Based on the charts, it appears that the crisis is currently contained. Notably, one chart that stands out is that of Barclays Bank, who’s shares can be traded with CFDs with ThinkMarkets. The chart below shows that the price dropped by 33.59% from this year’s high of 193.36. The price also traded below the April 2022 low of 139.68 and the January 2021 low of 129.52, likely triggering a significant number of stop-loss orders. The price has since then staged a bullish candle stick pattern indicating that the worst is in the short-term. If the price remains above today’s low of 128, I suspect Barclay’s price may correct 38.2% of this year’s slide, causing the price to reach 153.50.
What is the risk of this scenario? The most significant risk is that there are more banks in the same situation and that we see more panic in the days ahead, which could trigger the price to open below this week’s low. So, investors and traders will need to adjust their risk accordingly. However, as it looks right now, central banks are ready to step in, and in a coordinated manner.
Weekly chart Barclay’s bank
