The Swiss bank didn’t lend to Evergrande but investors in its funds may face losses linked to the troubled Chinese real estate firm – and to the wider sector.
Zurich-based Credit Suisse on Thursday reassured its investors that it hasn’t lent to Evergrande, a Chinese firm whose struggle to repay debt is raising fears over the wider economy. Beijing is bracing for Evergrande's collapse, «The Wall Street Journal» (behind paywall) reported on Thursday.
«Credit Suisse is not an existing lender to Evergrande and we have no direct lending exposure to the company,» a spokesman for the Swiss bank said in an emailed statement on Thursday.
Geared To Property Sector
However, Credit Suisse’s asset management arm maintains investments in Evergrande in a $2 billion emerging market corporate bond fund, where it makes for roughly $12 million (0.6 percent) of the total fund’s assets, according to an asset management update first reported by Swiss newswire «AWP».
Credit Suisse’s emerging market and Asia bond fund line is however highly geared to the wider real estate sector in China: eight funds listed by the bank hold between five percent and nearly 29 percent of their total assets in the Chinese property sector, according to the update.
Investors May Lose Out
In addition to this, target funds of Credit Suisse asset management hold small positions in Evergrande, it said in a separate update. The bank may have more exposure via target funds from other providers that it has yet to ascertain, it noted.
The disclosure makes clear that Credit Suisse fund investors, and not the bank itself, would be sitting on any losses incurred on Evergrande or on Chinese property. This is reminiscent of the Swiss lender’s dilemma with wealthy clients over Greensill asset management products.
UBS Calling Margins, Resting Easy
At crosstown rival UBS, CEO Ralph Hamers said he is resting easy about the Swiss wealth manager's exposure to Evergrande, at a brokerage conference on Thursday. He noted that UBS has called some margin over the issue – it isn't clear of whom – and that this had been «executed well».
Earlier on Thursday, Evergrande repaid a domestic bond, while an injection of cash into the banking system by China’s central bank soothed fears of a wider spillover. On Wednesday it emerged that UBS had warned its well-heeled clients over Evergrande, though perhaps not early enough.
