Credit Suisse announced on Thursday March 16 that it would borrow up to 50 billion Swiss francs (50.7 billion euros) from the Swiss National Bank on a short-term basis to ” to strenghten “ the group, whose title collapsed on the stock market. At the same time, the bank announced a series of debt buyback operations, for around 3 billion Swiss francs.
“These steps are a decisive move to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders.”the bank’s chief executive, Ulrich Koerner, was quoted in a statement as saying.
On Wednesday, the action of the bank Credit Suisse suffered the worst fall in its history, closing down 24.24% to 1.697 Swiss francs. Perceived as the weak link in the banking sector in Switzerland, the establishment saw its share price lose up to 30%, to 1.55 Swiss francs.
At a conference for the banking sector in Saudi Arabia, the president of Credit Suisse, Axel Lehmann, assured that the bank did not need government assistance. It is not “not a subject”he said, noting that the bank relies on many “strong financial ratios”without however managing to reassure the markets, made very nervous vis-à-vis any sign of weakness in the banking sector.
Meanwhile, concern goes beyond the borders of the Alpine country. European stock markets fell sharply again, hit by the difficulties of Credit Suisse, which revived fears about financial stability in the wake of the bankruptcy of the American bank Silicon Valley Bank.
Wall Street has resumed colors
The action of Credit Suisse took more than one in its fall. Victims of a domino effect, European banking stocks collapsed by more than 10% for Deutsche Bank, Commerzbank, Société Générale, BNP Paribas, Banco Sabadell and Banca Monte dei Paschi.
The French Prime Minister, Elisabeth Borne, asked the Swiss authorities to settle the problems of Credit Suisse, affirming before the Senate that this subject was of “their spring”. Mme Borne also clarified that the French finance minister, Bruno Le Maire, “would have contact with his Swiss counterpart in the next few hours”. The US Treasury Department (the Ministry of Economy and Finance) is also in contact with its counterparts in other countries regarding Credit Suisse, and is monitoring the situation, said a spokesperson.
Coming out of a long silence at the end of the day on Wednesday, the central bank and the policeman of the Swiss financial markets affirmed that “Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks. If necessary, the (Swiss national bank) will make cash available to Credit Suisse”. After this announcement, Wall Street took over and limited the damage.
On the other hand, the Chinese and Japanese stock markets opened sharply lower on Thursday.
A pillar of the Swiss financial center
This dizzying fall in the stock – the bank was worth just over CHF 7.3 billion in market capitalization as of mid-afternoon on Wednesday – began after statements by the chairman of Saudi National Bank (SNB), largest shareholder of Credit Suisse. The Saudis came to the bank’s rescue by entering its capital in November. But the SNB does not count ” absolutely not “ invest more in it ” many reasons “explained Ammar AlKhudairy, its president.
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The first relates to questions “regulatory”, he specified. Saudi National Bank holds a 9.8% stake. But, under Swiss law, Finma, the market surveillance authority in Switzerland, should decide if it crosses 10%. In an interview with the Reuters agency, Mr. AlKhudairy nevertheless said ” very happy “ of the Credit Suisse restructuring program, considering that it is a bank ” very solid “.
Founded in 1856, Credit Suisse is a pillar of the Swiss financial center which has contributed both to the development of rail in the Alpine country and to the emergence of groups specializing in insurance – such as Swiss Re or Swiss Life. – or the financing of large Swiss industrial companies, including the ancestor of ABB.
“Investors increasingly worried”
The bank has been in turmoil since the bankruptcy in 2021 of the British financial company Greensill, which marked the start of a series of scandals which have weakened the bank. Since March 2021, the stock has lost more than 83% of its value. “The pressure on Credit Suisse hit an already nervous market”reacted Jane Foley, an analyst at Rabobank, to Agence France-Presse (AFP).
The statements of this new shareholder have struck a chord at a time when investors are worried about the risk of contagion caused by the bankruptcy of the American bank Silicon Valley Bank. “It seems that there are more and more worried investors”, commented Neil Wilson, an analyst at Finalto, in a market commentary. But if Credit Suisse were to face “existential problems”SO “we would be faced with something of a completely different dimension. It really is too important to let go.”he insisted.
Unlike Silicon Valley Bank, Credit Suisse is one of 30 global banks deemed too big to fail, which imposes stricter regulations on it in times of difficulty. Contacted by AFP, the Swiss central bank, which has not yet spoken, declined to comment.
Credit Suisse launched a major restructuring program in October in an attempt to recover. But some shareholders ended up disassociating themselves, like the American investment company Harris Associates, long its largest shareholder, which revealed last week that it had sold its entire stake in the bank.
In early February, the bank disclosed a net loss of 7.3 billion Swiss francs (nearly 7.4 billion euros) for the 2022 financial year, amid massive withdrawals of funds from its customers. and had warned to still expect a pre-tax loss “substantial” in 2023.