Mipim 2023: Banking Contagion Worries European Real Estate As Credit Suisse Shares Sink

Banking giant Credit Suisse's share price sank 24% to a record low on Wednesday after the Saudi National Bank, one of its principal investors, said it would not offer more capital support.

The move rattled global markets already roiled by the collapse of Silicon Valley Bank and two others in the US.

By the end of the day, Swiss regulators stepped in to say they were ready to help Credit Suisse "if necessary". Credit Suisse's latest troubles began when it released an annual report earlier this week saying it had found “material weaknesses” relating to the bank’s failure to appropriately identify the risk of misstatements in its financial reporting. It previously said it suffered significant customer withdrawals.

The Swiss National Bank (SNB) and the Swiss Financial Market Supervisory Authority said jointly there are no indications of a "direct risk of contagion for Swiss institutions due to the current turmoil in the US banking market". But questions were immediately being asked about the ability of Switzerland to bail out the bank.

The growing crisis came as the Budget in the UK, which lays out the government's financial policy, did little to reassure the country's main stock market, the FTSE 100, which fell 3.8% or 293 points — the biggest drop in one day since the early days of the pandemic in 2020. Heavy losses in European banks have also raised stress levels in money markets.

The troubles for the banking sector began last week in the US with the collapse of tech lending specialist Silicon Valley Bank, the country's 16th-largest bank.

Silicon Valley Bank's UK arm has since been bought for £1 by HSBC, something the chancellor of the exchequer today said the government had advised on over the weekend to ensure there was no spread to the wider banking sector.

At the Mipim conference, where the real estate industry has gathered in Cannes, many expressed concern that bank troubles might spread and lead to a pullback in lending. Andy Poppink, CEO of global markets advisory at JLL, said he had been in Silicon Valley as the news unfolded and it had been "chaos" as depositors rush to withdraw their funds. He said the US government intervention to take over the bank, along with two others, had been vital in calming fears for the near term.

"Fingers are crossed that this does not lead to further contagion," agreed Simon Prichard, a senior partner at the brokerage Gerald Eve.

Mark Dixon, founder and CEO, IWG Group, said while the collapse of Silicon Valley Bank could impact real estate in a number of ways there was a perceived positive: “To be honest people at Mipim seem to be walking around talking about the SVBs and Credit Suisses with smiles on their faces thinking it will mean lower interest rates.”

Indeed, many speculated that the Federal Reserve in the US and the Bank of England would slow down interest rate rises now to counter any issues the banks are facing. That will, some in the market were suggesting, lead to cheaper debt for buying real estate.