Credit Suisse shares slide after Saudi backer rules out further assistance

Credit Suisse shares slide after Saudi backer rules out further assistance

Commuters cycle past a bank branch of Credit Suisse Group AG in Basel, Switzerland, on Tuesday, October 25, 2022. Credit Suisse will report its third quarter results and strategy overview on October 27.

Stefan Wermuth | Bloomberg | Getty Images

Credit Suisse shares fell to a new all-time low for the second straight day on Wednesday after a top investor in the struggling Swiss bank said it could no longer provide cash due to regulatory restrictions.

Trading in the bank’s falling shares was halted several times throughout the morning as it fell below 2 Swiss francs ($2.17) for the first time.

Switzerland-listed Credit Suisse shares ended the session down 24%, recouping some of their earlier losses after falling more than 30% at one point. Credit Suisse American Depositary Receipts traded in the US fell 20%.

After the European markets closed, Swiss regulators said that Credit Suisse is currently meeting capital and liquidity requirements and that the Swiss National Bank will provide additional liquidity if needed.

The share price tumble sparked a broader sell-off among European lenders, who were already facing significant market turmoil due to the impact of Silicon Valley Bank. Among the biggest losers were France’s Societe Generale, Spain’s Banco de Sabadell and Germany’s Commerzbank.

Several Italian banks were also subject to automatic trading halts on Wednesday, including UniCreditFineco Bank and Monte dei Paschi.

Credit Suisse’s biggest investor, the Saudi National Bank, said it could not provide any more financial support to the Swiss bank, according to a Reuters report, sparking the latest decline.

“We can’t because we would go over 10%. It’s a regulatory issue,” the head of the National Bank of Saudi Arabia, Ammar Al Khudairy, told Reuters on Wednesday. However, he added that the SNB was happy with Credit Suisse’s transformation plan and indicated that the bank was unlikely to need any additional money.

The Saudi National Bank took a 9.9% stake in Credit Suisse last year as part of the Swiss lender’s $4.2 billion capital raise to fund a massive strategic overhaul aimed at improving investment banking performance and address a litany of risks and compliance failures.

Credit Suisse CEO Ulrich Koerner tried to defend the bank’s liquidity base on Wednesday, saying it was “very, very strong,” Reuters reported, citing an interview with CAN.

Koerner adds: “We basically meet and exceed all regulatory requirements.”

Meanwhile, Credit Suisse chairman Axel Lehmann, speaking to CNBC’s Hadley Gamble during a panel session in Riyadh, Saudi Arabia on Wednesday morning, declined to comment on whether his firm would need any type of government support going forward.

When asked if he would rule out assistance, Lehmann replied: “That’s not the issue.”

“We are regulated, we have strong capital ratios, a very strong balance sheet. We’re all on board. So that’s not the issue at all.”

The Swiss National Bank declined to comment on the Credit Suisse share price movement, Reuters reported.

“Material Weaknesses”

Investors also continue to assess the impact of the bank’s Tuesday announcement that it had identified “material weaknesses” in its 2022 and 2021 financial reporting processes.

Switzerland’s second-largest lender made the observation in its annual report, originally scheduled for last Thursday but delayed by a late call from the US Securities and Exchange Commission.

The SEC call related to a “technical assessment of previously disclosed revisions to the consolidated statements of cash flows for the years ended December 31, 2020 and 2019 and related controls.”

In late 2022, the bank announced that it had experienced “significantly higher cash withdrawals, non-renewals of maturing term deposits and net asset outflows at levels that significantly exceeded rates incurred in the third quarter of 2022.”

Credit Suisse recorded more than 110 billion Swiss francs in client withdrawals in the fourth quarter as it continued to be plagued by a series of scandals, legacy risks and compliance breaches.

State aid is for us

Correction: This news item has been updated with the correct number for the Credit Suisse capital increase.