Credit Suisse drops another five percent as traders melt down emergency liquidity

  • Shares in Credit Suisse were 4.6% lower at 10:18 a.m. London time.
  • The bank’s shares began falling after Saudi Arabia’s central bank revealed it would not provide the bank with more cash due to regulatory requirements earlier this week.
  • The bank is undergoing a massive strategic overhaul to restore stability and profitability after a string of losses and scandals, but capital markets and stakeholders seem unconvinced.

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

Stefan Wermuth | Bloomberg | Getty Images

Shares of Credit Suisse fell about 5% in early trade on Friday, after surging in the previous session after the embattled lender said it would borrow up to 50 billion Swiss francs ($54 billion) from the Swiss central bank.

Shares were 4.6% lower at 10:18 a.m. London time.

This week’s intervention by Swiss authorities, which also confirmed that Credit Suisse met capital and liquidity requirements for “systemically important banks”, sent shares jumping more than 18% on Thursday after closing at an all-time low on Wednesday. Credit Suisse also offered to buy back about 3 billion francs worth of debt related to 10 US dollar-denominated senior notes and four euro-denominated senior notes.

The drop to Wednesday’s lows came after top investor Saudi Arabia’s central bank revealed it would not provide the bank with more cash due to regulatory requirements, exacerbating a downward spiral in Credit Suisse’s share price that began with a delay in its annual results to financial reporting. concerns.

The bank is undergoing a major strategic reform, the purpose of which is to restore stability and profitability after losses and scandals. The restructuring includes the spin-off of an investment bank to form US-based CS First Boston, a sharp reduction in risk-weighted assets and a $4.2bn capital increase, partly funded by Saudi National’s acquisition of a 9.9% stake. Bank.

However, capital markets and stakeholders do not seem to be convinced. The share price has fallen sharply over the past year, and Credit Suisse has seen huge outflows from its assets under management, losing around 38% of its deposits in the last quarter of 2022. Credit default swaps, which insure bondholders against default, soared. new records this week.

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

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

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

“However, these measures are not enough to completely get Credit Suisse out of trouble, it is about restoring market confidence by fully investing the investment bank, giving a full guarantee to all SNB deposits and increasing capital to give Credit Suisse time to restructure.”

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