Credit Suisse shares fell nearly 25% as its second-biggest lender won’t invest more money
On Wednesday, Credit Suisse’s top shareholder said it wouldn’t invest any more money into the Swiss bank. Saudi National Bank Chairman Ammar Al Khudairy told the media outlet that taking a stake of more than 10% in Credit Suisse would trigger regulatory complications.
That pushed shares of Credit Suisse to a new record low on Wednesday. The stock fell 26% in Zurich and its American depositary receipts were down 28% in premarket trading. It was pummelled earlier in the week in the market fallout from the collapse of U.S. tech lender Silicon Valley Bank.
CEO Ulrich Koerner moved to calm nerves, saying Credit Suisse’s liquidity base remained strong and was well above all regulatory requirements.
Koerner had said earlier in the week Credit Suisse’s liquidity coverage ratio averaged 150 per cent in the first quarter of this year.
After Silicon Valley Bank’s collapse last week, the banking sector is on high alert. Trading in shares of Credit Suisse and some European banks such as France’s Société Générale and Italy’s UniCredit was temporarily halted. U.S. lenders Citigroup C, JPMorgan Chase JPM, and Wells Fargo (WFC) also fell early Wednesday. Regional banks Western Alliance Bankcorp (WAL), First Republic Bank (FRC), and Comerica (CMA) retreated too.
“The banking rout has taken on another ominous twist,” said Susannah Streeter, head of money markets at Hargreaves Lansdown. “The worry is that banks sitting on large unrealized losses in their bond portfolios might not have sufficient buffers if there is a fast withdrawal of deposits.”
Exane analysts said they saw a bailout by the Swiss National Bank and financial regulator Finma, possibly with one or more other banks, as the “most likely scenario” facing Credit Suisse.
The analysts also said Saudi National Bank could do a u-turn.
Saudi National Bank increased its stake in Credit Suisse last year and committed to investing up to 1.5 billion Swiss francs ($1.5-billion).
Credit Suisse has struggled recently. The stock fell on Tuesday after it released a delayed annual report that described weaknesses in the firm’s financial controls. The report had been delayed after the Securities and Exchange Commission raised questions about its cash flow statements in 2019 and 2020.
Last week, asset manager Harris Associates, Credit Suisse’s largest shareholder, completely exited its position in the bank, according to a Financial media report.
Credit Suisse declined to comment.
This is the latest in a series of issues at the bank. The 170-year-old Swiss bank was hit hard by losses from the collapse of Archegos Capital and Greensill Capital in 2021. The bank has posted a loss for five straight quarters and is in the middle of its second major overhaul in as many years after a series of scandals, executive changes, and client withdrawals.
In November, Credit Suisse announced plans to spin out its investment bank under its revived First Boston brand. It also slashed 9,000 jobs.
Credit Suisse is now focusing on reviving its wealth management business in recent years. That unit experienced about $100 billion of outflows in the fourth quarter. Other than the Saudi National Bank, Credit Suisse’s biggest shareholders include Qatar Holding, Olayan Group, and BlackRock.
Part of the article was reported by Barron’s.