Credit Suisse loses another 9% as traders process emergency liquidity


A Credit Suisse Group AG office building at night in Bern, Switzerland, on Wednesday, March 15, 2023.

Stefan Wermuth | Bloomberg | Getty Images

Credit Switzerland shares fell 9% on Friday, following an increase from the previous session when the embattled lender said it will borrow up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank.

This week’s intervention by Swiss authorities, which also reaffirmed that Credit Suisse met capital and liquidity requirements imposed on “systemically important banks”, caused stocks to rise more than 18% on Thursday after falling at a low on Wednesday. historic lows were closed. Credit Suisse also offered to repurchase approximately 3 billion francs worth of debt, covering 10 US dollar-denominated senior debt securities and four euro-denominated senior debt securities.

The drop to Wednesday’s low came after top investor Saudi National Bank announced it would no longer lend the bank money due to regulatory requirements, exacerbating a downward spiral in Credit Suisse’s share price that began with the slowdown in its annual financial reporting results . to assure.

The bank is undergoing a major strategic overhaul to restore stability and profitability after a litany of losses and scandals. The restructuring includes the spin-off from the investment bank to form US-based CS First Boston, a sharp reduction in exposure to risk-weighted assets and a $4.2 billion capital raise, funded in part by the 9.9 stake. % acquired by the Saudi National Bank.

However, capital markets and stakeholders seem unconvinced. The share price has fallen sharply over the past year and Credit Suisse saw a massive outflow of assets under management, losing about 38% of its deposits in the fourth quarter of 2022. Credit default swaps, which insure bondholders against a company’s bankruptcy, rose to new all-time highs this week.

Switzerland's second largest bank is trying to get back on track after a series of scandals and losses.

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Bank default risk has risen to crisis levels, according to the CDS rate, with the 1-year CDS rate rising nearly 33 percentage points to 38.4% on Wednesday, before ending at 34.2% on Thursday.

Charles-Henry Monchau, chief investment officer at Syz Bank, said Credit Suisse must go further to restore investor confidence.

“This support from the SNB and the statement from regulators indicates that Credit Suisse will continue in its current form,” he said in a note Thursday.

“However, these measures are not enough to get Credit Suisse out of trouble completely; it is about restoring market confidence through the full exit of the investment bank, a full guarantee on all deposits by the SNB and an injection of equity to give Credit Suisse time to restructure.”

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