Credit Suisse shares sink as top shareholder rules out more cash

By Nathalie OLOF-ORS

Credit Suisse shares nosedived Wednesday after its main shareholder said it would not provide more funding, with reassuring comments from the Swiss bank’s chairman unable to calm the market panic.

Switzerland’s second-biggest bank, hit by a series of scandals, saw its share price tumble off a cliff after Saudi National Bank chairman Ammar Al Khudairy said it would “absolutely not” up its stake, as European stock markets plunged amid renewed concerns about the banking sector.

Credit Suisse’s market value had already taken a heavy blow this week over fears of contagion from the collapse of two US banks and its annual report citing “material weaknesses” in internal controls.

The bank’s shares were soon in freefall on the Swiss stock exchange, plunging more than 30 percent to a record low of 1.55 Swiss francs.

The bank regained some ground in afternoon trading, and at 1530 GMT, it was down 16 percent at 1.875 francs.

Amid the market panic, Credit Suisse chairman Axel Lehmann insisted at the Financial Sector Conference in Saudi Arabia that the bank did not need government assistance, saying it “isn’t a topic”.

“We have strong capital ratios, a strong balance sheet,” Lehmann said, adding: “We already took the medicine,” referring to the bank’s drastic restructuring plan revealed in October.

Credit Suisse is one of 30 banks globally deemed too big to fail, forcing it to set aside more cash to weather a crisis.

– ‘Too big to fail’ –

The bank and financial authorities remained quiet about the share fall.

But citing three anonymous sources, the Financial Times newspaper reported that Credit Suisse had appealed to Switzerland’s central bank and its financial regulator for “a show of support”.

In the meantime, fears were spreading beyond Switzerland’s borders.

French Prime Minister Elisabeth Borne called Wednesday on the Swiss authorities to step in and “settle” the problem, adding that the French and Swiss finance ministers were due to speak in the next few hours.

Analysts warned of mounting concerns over the bank’s viability and the impact on the larger banking sector, as shares of other lenders sank on Wednesday after a rebound the day before.

“Where one big shareholder goes, others may follow. Credit Suisse now has to come with a concrete plan to stop outflows, and do it fast,” IG analyst Chris Beauchamp told AFP.

Neil Wilson, chief market analyst at trading firm Finalto, agreed.

“If Credit Suisse were to run into serious existential trouble, we are in a whole other world of pain. It really is too big to fail.”

– Role of the regulators –

The Saudi National Bank became Credit Suisse’s largest shareholder in a capital raise in November, launched to finance a major restructuring of the Zurich-based lender aimed at steadying the ship.

But Khudairy said the kingdom’s largest commercial bank would not be putting in any more money.

“The answer is absolutely not, for many reasons outside the simplest reason which is regulatory and statutory,” he told Bloomberg TV.

“We now own 9.8 percent of the bank. If we go above 10 percent, all kind of new rules kick in… and we are not inclined to get into a new regulatory regime,” the chairman said.

Crossing the 10 percent threshold would cause a stir in Switzerland, where shareholders have already seen their stake diluted during the capital increase and continue to see the value of their investment plummet.

In February 2021, Credit Suisse shares were worth 12.78 Swiss francs, but since then the bank has endured a barrage of problems and shed 83 percent of its market value.

It was hit by the implosion of US fund Archegos, which cost it more than $5 billion.

Its asset management branch was rocked by the bankruptcy of British financial firm Greensill, in which some $10 billion had been committed through four funds.

The bank booked a net loss of 7.3 billion Swiss francs ($7.8 billion) for the 2022 financial year.

That came against a backdrop of massive withdrawals of funds by its clients, including in the wealth management sector — one of the activities on which the bank intends to refocus as part of a major restructuring plan.

“The pressures on Credit Suisse have hit an already jittery market,” Rabobank analyst Jane Foley told AFP. — Agence France-Presse

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