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Credit Suisse shares jump as Swiss central bank’s emergency loan eases confidence crisis

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A sign for Swiss bank Credit Suisse is seen in front of an office building in Zurich, Switzerland, on March 16, 2023.DENIS BALIBOUSE/Reuters

Credit Suisse shares soared after the Swiss central bank launched an effective rescue plan that was aimed not just in shoring up confidence in CS itself but instilling confidence among investors who were abandoning financial services companies everywhere.

Shares of Credit Suisse Group AG were up 24 per cent in midday trading Thursday, European time, on the Swiss bourse, though they had opened 40-per-cent higher – the most on record.

The rebound came after an extraordinary series of events, culminating in a 2 a.m. announcement that CS would boost its liquidity position by borrowing up to 50-billion Swiss francs (US$54-billion) from the Swiss National Bank under a covered loan facility as well as short-term liquidity facility, both backed by high-quality collateral.

Six hours earlier, the central bank had said in a statement that it would, “if necessary,” provide CS with ample liquidity. When it became apparent that the reassurances from the central bank were not enough to prevent further deterioration – and a possible bank run – CS went to the next step and stated it would implement the emergency borrowing.

CS, a lender and investment bank that once was once among the world’s most prominent financial services players, had plenty of assets that could be sold to shore up liquidity. But those sales would not have been quick and CS had no time to spare as its shares plummeted, triggering a confidence crisis among investors in market already battered by the collapse a few days earlier of California’s Silicon Valley Bank.

“Credit Suisse is a million miles away from Silicon Valley Bank,” Megan Greene, global chief economist at Kroll Institute, said in an interview with The Globe on Thursday. “It has very healthy levels of liquid assets should they be needed, access to a string of central bank facilities, and less sensitivity to sharp moves in interest rates than many rivals. What matters now is whether the bank can weather this storm without a crisis of faith overtaking the fundamentals of its balance sheet, which are still sound.”

CS also announced plans to buy back some of its beaten-up debt. It will make a cash tender offer for U.S.-dollar senior debt securities worth up to US$2.5-billion and euro-denominated senior debt securities worth up to 500-million euros. Those offers will expire on March 22.

In a statement, CS chief executive Ulrich Koerner, who was appointed last summer, said that “These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation…My team and I are resolved to move forward rapidly to deliver a simpler and more focused bank.”

JPMorgan analysts said in a note that the status quo at CS “was no longer an option” and that the “option of a takeover [is] the most likely scenario.” Switzerland’s largest bank, UBS Group, reportedly is seen as a possible buy of some or all of CS.

While the shares of the scandal-ridden CS had been losing ground for at least five years, CS went into crisis mode early this week, at a time when many big banks’ bond portfolios were suffering damage from rising interest rates

On Tuesday, CS reported that PwC, its auditor, had found “material weaknesses” in its financial reporting controls. The next day, Saudi National Bank chairman Ammar Alkhudairy said his bank would “absolutely not” provide extra capital to CS. The Saudi bank had bought 10 per cent of CS last year and saw the value of that investment steadily deteriorate.

That revelation pushed down CS shares by 24 per cent on Wednesday. In spite of Thursday’s rebound, the shares as still down 70 per cent in one year, giving the bank a market value of less than CHF7-billion.

While CS’s immediate crisis appears over, the bank still faces upheaval as it tries to reinvent itself as a smaller, more stable operations. While its strongest business, wealth management, could find a buyer, its assets under management fell by 27 per cent last year. The bank’s deposits fell by 37 per cent in the fourth quarter alone.

 

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Transat AT reports $39.9M Q3 loss compared with $57.3M profit a year earlier

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MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.

The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.

The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.

Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.

On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.

Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.

This report by The Canadian Press was first published Sept. 12, 2024.

Companies in this story: (TSX:TRZ)

The Canadian Press. All rights reserved.

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Dollarama keeping an eye on competitors as Loblaw launches new ultra-discount chain

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Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.

“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.

“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”

Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.

However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.

The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.

Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.

“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.

Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.

“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.

The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.

The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.

The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”

“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.

Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.

Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.

She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”

Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.

To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.

“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”

The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.

“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.

“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”

This report by The Canadian Press was first published Sept. 11, 2024.

Companies in this story: (TSX:DOL)

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U.S. regulator fines TD Bank US$28M for faulty consumer reports

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TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.

The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.

It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.

CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.

TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.

The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.

This report by The Canadian Press was first published Sept. 11, 2024.

Companies in this story: (TSX:TD)

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