© Reuters. FILE PHOTO: A Goldman Sachs sign is seen above its booth on the floor of the New York Stock Exchange, January 19, 2011. REUTERS/Brendan McDermid/File Photo
LONDON (Reuters) – Goldman Sachs (NYSE:) cut its recommendation on European bank debt exposure to neutral from overweight, saying a lack of clarity on Credit Suisse’s future path would put pressure on the broader sector in the region. .
Credit Suisse received a $54 billion lifeline from the Swiss central bank on Thursday to shore up liquidity after a drop in its stocks and bonds intensified fears of a global banking crisis.
“The Swiss National Bank’s decision to provide Credit Suisse with significant and inexpensive liquidity failed to stabilize sentiment in both the equity and credit markets,” Goldman Sachs analyst Lotfi Karoui wrote in a note to clients dated on March 17.
Relative to 15 years ago, industry fundamentals were stronger and global systemic linkages weaker, a trend that greatly limited the risk of a potential vicious cycle of counterparty credit losses, Karoui said.
“However, a stronger policy response is likely to be needed to achieve some stability.”
Goldman Sachs began its overweight recommendation on European bank debt in mid-January.
Credit Suisse Group AG entered a decisive weekend after some rivals turned cautious in their dealings with the bank and regulators urged it to seek a deal with Swiss rival UBS AG.
