Credit Suisse’s woes don’t make for a Lehman moment — Analysis

Over the weekend, armchair investors on Reddit chats and Twitter threads were ablaze with talk about a possible imminent collapse of the Zurich-based institution, and how its effects could ripple across the financial sector.

Credit-default swaps--a type of insurance investors take out against a company defaulting--surged after the circulation of a memo in which the bank’s Chief Executive Ulrich Koerner urged staff not to confuse the company’s tumbling share price and its liquidity and capital position.

Shares in the bank slid as much as 12% intraday on Monday, before recovering to fall just 1%. They have lost more than half of their value in the year to date.

However, analysts were generally dismissive about suggestions that Credit Suisse could collapse, and that this could have a domino effect on financial peers.

Credit-default swaps aren’t a perfect gauge of risk, precisely because they are subject to speculation, Swissquote analyst Ipek Ozkardeskaya said.

But the issue does affect investor sentiment and can increase the levels of financial stress a bank comes under, which has been the case for Credit Suisse recently, she said.

Still, Ms. Ozkardeskaya added that the turmoil hitting the bank had little chance of harming other institutions, known as contagion.

Indeed, Santander’s Chief Executive Jose Antonio Alvarez said he doesn’t see contagion risks stemming from Credit Suisse, Reuters reported.

He said there are “extraordinarily high levels of liquidity" in the sector, according to the report.

Despite concerns about the company, Credit Suisse’s common equity Tier 1 ratio--a gauge of financial muscle against crises--is high compared with peers’, Citi analyst Andrew Coombs said in a note. At the end of June, it was 13.5%, higher than 13% at Deutsche Bank AG and 12.9% at Societe Generale SA.

Instead, Credit Suisse remains mostly under pressure as investors await a convincing strategy, including news on plans for its troubled investment bank, Suvi Platerink Kosonen, senior strategist at ING, said, as the bank pushes through with its ongoing painful restructuring.

The strategy update is due when the bank publishes third-quarter earnings on Oct. 27.

Credit Suisse said Wednesday that it would be premature to comment on any potential outcomes of the strategic update before then.

The bank may even bring forward the update--which should offer details of the bank’s path back to profitability--she said. However, investors’ concerns are likely to persist even after the update, as execution risks for any plan remain high, Ms. Kosonen said.

While much of the concern around Credit Suisse is company-specific, the scale of its share-price movement will likely keep investors on their toes, especially when it comes to involving themselves with riskier bank names, Ms. Kosonen said.