Shares in the Swiss banking giant plummeted 12% to an all-time low on Monday after a weekend of fevered Twitter speculation about its financial health, before they regained almost all of the losses later in the day.
Investors are worried about how the bank will cover such a plan’s cost – which many analysts have pegged at $4-billion – and what that would mean for its core capital ratio of 13.5%, especially during a period when the investment bank has been suffering heavy losses. With its shares on the floor after dropping more than 95% from their peak, the lender hopes to raise cash through disposals rather than a highly dilutive rights issue of the type Deutsche Bank ended up doing.
“Had they started to restructure a year or two ago then they would have had an easier time selling as there was more demand for risky assets,” said Andreas Venditti, a banks analyst at Vontobel. The firm has been doubly unlucky because it’s skewed toward investment bank activities that are struggling right now, including its leveraged-loans unit.