Credit Suisse sheds another 10% as traders digest emergency liquidity

Credit Suisse sheds another 10% as traders digest emergency liquidity

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

Stefan Wermuth | Bloomberg | Getty Images

Swiss credit Shares fell 10% in Friday morning trade after surging in the previous session when the embattled lender said it would borrow up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank.

This week’s intervention by Swiss authorities, who also reiterated that Credit Suisse meets capital and liquidity requirements imposed on “systemically important banks,” caused shares to soar more than 18% on Thursday after rising on Wednesday closed at an all-time low. Credit Suisse also offered to repurchase approximately CHF 3 billion of debt relating to 10 US dollar-denominated senior debt and four euro-denominated senior debt.

The plunge to Wednesday’s lows came after top investor, the National Bank of Saudi Arabia, announced it would no longer provide cash to the bank due to regulatory requirements, fueling a downward spiral in Credit Suisse’s share price associated with the Delay in annual results from financial reporting began concerns.

The bank is undergoing a massive strategic overhaul aimed at restoring stability and profitability after a litany of losses and scandals. The reorganization includes the spin-off of the investment bank into US-based CS First Boston, a sharp reduction in exposure to risk-weighted assets, and a $4.2 billion capital raise funded in part by Saudi National’s acquired 9.9 -percentage stake is financed bank.

However, capital markets and stakeholders do not seem convinced. The stock price has fallen sharply over the past year and Credit Suisse has seen huge outflows in assets under management, losing around 38% of its deposits in the fourth quarter of 2022. Credit default swaps, which insure bondholders against a company’s default, rose sharply to new record highs this week.

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

Charles-Henry Monchau, Syz Bank’s chief investment officer, said Credit Suisse needed to go further to restore investor confidence.

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

“However, these measures are not enough to completely bail out Credit Suisse; it’s about restoring market confidence through the complete exit of the investment bank, a full guarantee on all deposits by the SNB and an equity injection, giving Credit Suisse time to restructure.”