State Street falls after report it may acquire Credit Suisse

Swiss blog says State Street could make an offer for bank. State Street says it’s focusing on Brown Brothers purchase.

State Street Corp. fell the most in almost two months after declining to comment on a report it’s looking to acquire Credit Suisse Group AG.

“We are not going to respond to an earlier news report,” State Street said in an email Wednesday. “As we have previously discussed, we are focused on our pending acquisition of Brown Brothers Harriman’s Investors Services business.”

Shares of State Street dropped 5.4% to close at $69.04. Credit Suisse shares fell as much as 3.7% at the open in Zurich.

Earlier Wednesday, Swiss blog Inside Paradeplatz reported that State Street could make a bid for Credit Suisse, citing a single person. Credit Suisse shares rallied on the report, reversing an earlier decline after the Swiss bank warned of a third straight quarterly loss.

“For many reasons, we see this combination as highly unlikely, based on capital levels, State Street’s pending BBH deal, and Credit Suisse’s plethora of ongoing legal/business challenges,” Jefferies Financial Group Inc. analyst Ken Usdin said in a note to clients.

Credit Suisse’s market value is $19 billion, and State Street’s is $25.4 billion.

The Swiss bank has spent much of the past 18 months struggling to emerge from twin hits: the collapse of Archegos Capital Management and Greensill Capital. Its stock has fallen 73% over the past eight years, the worst decline among major European banks, and it now trades at a 60% discount to book value.

The Zurich-based lender is considering a fresh round of job cuts, part of a renewed push to slash costs after warning of a second-quarter loss, Bloomberg reported on Wednesday.

ASSET MANAGEMENT

Usdin and other analysts expressed skepticism over a potential deal, but said Credit Suisse’s asset-management business may hold some appeal for State Street, which manages $4.1 trillion. Credit Suisse Chief Executive Officer Thomas Gottstein said in March 2021 that the firm was considering spinning out the unit, but the company decided in a strategic update later that year to keep it as one of its four core divisions.

Kyle Sanders, an analyst at Edward Jones, said a full takeover of Credit Suisse was an unlikely move for State Street, and agreed that a more plausible route could be for the Boston-based firm to acquire just the asset-management division.

“That seems like it could have more potential,” Sanders said in a phone interview. “There’s some history to suggest State Street is eager to do some type of deal in the asset-management space.”

Credit Suisse’s job cuts are likely to come as it prepares to update investors on risk, compliance, technology and wealth management on June 28, people familiar with the matter said. The final tally of cuts is still to be decided.