Credit Suisse's share prices surged sharply on Wednesday after rumors emerged of a possible takeover deal. One news outlet claimed that U.S-based State Street is on the verge of submitting a takeover bid for the bank.
The lender's stock price jumped 3.8% in Zurich because of the rumors. The shares were up more than 14% from their lows earlier in the day. The STOXX Europe 600 Index was down 0.7%. Earlier in the day, the stock had plunged to its lowest level in over 20 years as the bank warned of a potential second-quarter loss due to continued market volatility.
State Street shares fell 5.4% to $69.04 in the United States. Credit Suisse's shares on the New York Stock Exchange fell 1% to $6.87.
The report published by Inside Paradeplatz claimed that State Street was prepared to bid 9 Swiss francs per share to take over the company. The alleged offer represents a more than 30% premium on Credit Suisse's closing price Tuesday. The reported bid values the bank at around $23.6 billion.
Last September, State Street announced that it had agreed to purchase the investor services unit of investment bank Brown Brothers Harriman & Co for $3.5 billion in cash, bolstering its position in the race to become the world's largest custodian bank.
Most analysts have expressed doubt over the rumors. Jeffries analysts said it was "highly unlikely" that State Street would acquire Credit Suisse given its current deal with Brown Brothers and the bank's current legal and commercial issues.
In a statement to clients, a leading U.S. brokerage questioned the logic of any State Street interest in the Swiss bank, noting unknown synergies for the U.S. custodian, as well as the danger of capital expenses, job layoffs, and legal risks.
The rumors come after Credit Suisse issued its third straight quarterly profit warning on Wednesday. The bank has designated 2022 as a "transition" year in which it hopes to move on from expensive scandals that resulted in a near-complete overhaul of senior management and a restructuring aimed at reducing risk-taking, notably in its investment bank.
Since the collapse of $10 billion in supply-chain finance funds tied to Greensill Capital and a more than $5 billion loss on the unwinding of deals by investment company Archegos, Credit Suisse's shares have lost over half their value. The setbacks generated speculation about whether the Swiss bank may be challenged by shareholders seeking its dissolution or whether its dwindling stock market value makes it a candidate for a hostile takeover.