Goldman Sachs Issues Recession Warning Despite Credit Suisse $54bn Lifeline

Shares of Credit Suisse surged by as much as 40 percent and European markets opened higher on Thursday after the troubled Swiss giant secured an emergency loan of up to $54 billion from the country's central bank.

Yet, despite this clear sign that investors' fears over a potentially looming banking crisis have been appeased, economists at Goldman Sachs Group Inc. have increased the company's estimate of the chance of the U.S. economy falling into a recession to 35 percent over the next 12 months, as reported by Bloomberg.

On Wednesday, Credit Suisse—which after being hit by a series of scandals in recent years has found itself at the center of the banking sector storm started by the collapse of Silicon Valley Bank (SVB)—said it would borrow funding from Switzerland's central bank to shore up its finances.

The announcement seems to have calmed down investors, which had previously sent the European stock markets spinning as many feared the Swiss bank might cause a wider crisis in the banking world.

On Thursday, stock markets in London and Paris rebounded slightly from the previous day—a clear sign of renewed—and likely careful–optimism towards the fate of the Swiss bank.

Credit Suisse
The company logo is seen at the global headquarters of Swiss bank Credit Suisse in Zurich, Switzerland. Credit Suisse shares surged by 40 percent on Thursday after the bank asked the Swiss government for support. Arnd Wiegmann/Getty Images

Credit Suisse had recently postponed publication of its annual reports after reportedly receiving a call by the U.S. Securities and Exchange Commission (SEC), which raised questions about the bank's previous financial statements. On Tuesday, the bank revealed to have found "material weakness" in its financial reporting.

This weakness, said the bank, "could result in misstatements of account balances or disclosures that would result in a material misstatement to the annual financial statements of Credit Suisse." Following the bank's revelation, Credit Suisse's biggest shareholder, Saudi National Bank, declared that it would not buy more shares in the bank.

The apparent panic that spread among investors following this announcement was only appeased by the news of the Swiss National Bank's loan on Wednesday. But the surge in Credit Suisse shares and the positive opening of the European markets on Thursday are "very early signs" that the measures taken by Swiss authorities are being successful in turning the tide, Joost Beaumont, head of bank research at ABN Amro's, told clients this morning, as reported by The Guardian.

It's not yet clear for how long the markets will remain confident about the fate of the scandal-plagued bank, which in February reported its biggest annual loss since the financial crisis of 2008.

The European Central Bank (ECB) has announced during a press conference on Thursday, that it will raise interest rates half a percentage point to tackle inflation in the eurozone—despite the current uncertainty in the global banking sector.

These are sensitive times for the banking industry, as fears of contagion from SVB to the wider global sector have not yet been completely dissipated. In the U.S, fears persist despite the government intervening to prevent a potential run on banks this week.

Treasury Secretary Janet Yellen is expected to tell the Senate Finance Committee on Thursday that the U.S. banking system remains sound.