A Credit Suisse Group AG office constructing at night in Bern, Switzerland, on Wednesday, March 15, 2023.
Stefan Wermuth | Bloomberg | Getty Images
Credit Suisse shares fell 8% on Friday, after soaring over the previous session because the embattled lender said it is going to borrow as much as 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 the capital and liquidity requirements imposed on “systemically vital banks,” prompted shares to leap greater than 18% on Thursday after closing at an all-time low on Wednesday. Credit Suisse also offered to purchase back around 3 billion francs’ price of debt, referring to 10 U.S. dollar-denominated senior debt securities and 4 euro-denominated senior debt securities.
The slide to Wednesday’s low got here after top investor the Saudi National Bank revealed it will not provide the bank with any more money as a consequence of regulatory requirements, compounding a downward spiral in Credit Suisse’s share price that began with the delay of its annual results over financial reporting concerns.
The bank’s Swiss-listed shares ended the week down 25.5%.
The bank is undergoing an enormous strategic overhaul aimed toward restoring stability and profitability after a litany of losses and scandals. The restructure involves the spin-off of the investment bank to form U.S.-based CS First Boston, a steep reduction in exposure to risk-weighted assets, and a $4.2 billion capital raise funded partly by the 9.9% stake acquired by the Saudi National Bank.
Nonetheless, capital markets and stakeholders appear unconvinced. The share price has fallen sharply during the last 12 months and Credit Suisse has seen huge outflows in assets under management, losing around 38% of its deposits within the fourth quarter of 2022. Credit default swaps, which insure bondholders against an organization defaulting, soared to latest record highs this week.
Based on the CDS rate, the bank’s default risk has surged to crisis levels, with the 1-year CDS rate jumping by almost 33 percentage points to 38.4% on Wednesday, before ending Thursday at 34.2%.
Charles-Henry Monchau, chief investment officer at Syz Bank, said Credit Suisse must go further to revive investor confidence.
“This support from the SNB and the statement from regulators indicate that Credit Suisse in its current form will proceed,” he said in a note Thursday.
“Nonetheless, these measures usually are not sufficient for Credit Suisse to be completely out of trouble; it’s about restoring market confidence through the entire exit of the investment bank, a full guarantee on all deposits by the SNB, and an injection of equity capital to offer Credit Suisse time to restructure.”
Correction: This story has been updated with the proper weekly fall for Credit Suisse.
