Credit Suisse shares tank after Saudi backer rules out further assistance

FAN Editor

Commuters cycle past a Credit Suisse Group AG bank branch in Basel, Switzerland, on Tuesday, Oct. 25, 2022. Credit Suisse will present its third quarter earnings and strategy review on Oct. 27.

Stefan Wermuth | Bloomberg | Getty Images

Shares of Credit Suisse on Wednesday plunged to a fresh all-time low for the second consecutive day after a top investor in the embattled Swiss bank said it would not be able to provide any more cash due to regulatory restrictions.

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

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Swiss-listed Credit Suisse shares ended the session down 24%, paring some of its earlier losses after dropping more than 30% at one point. The U.S.-traded American depositary receipts of Credit Suisse were last down about 15%.

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

The share price rout renewed a broader sell-off among European lenders, which were already facing significant market turmoil as a result of the Silicon Valley Bank fallout. Some of the biggest decliners included France’s Societe Generale, Spain’s Banco de Sabadell and Germany’s Commerzbank.

Several Italian banks on Wednesday were also subject to automatic trading stoppages, including UniCredit, FinecoBank and Monte dei Paschi.

Credit Suisse’s largest investor, Saudi National Bank, said it could not provide the Swiss bank with any further financial assistance, according to a Reuters report, sparking the latest leg lower.

“We cannot because we would go above 10%. It’s a regulatory issue,” Saudi National Bank Chairman Ammar Al Khudairy told Reuters on Wednesday. However, he added that SNB is happy with Credit Suisse’s transformation plan and suggested the bank was unlikely to need extra 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 addressing a litany of risk and compliance failures.

Silicon Valley Bank's collapse a 'warning signal' to banking system: Credit Suisse chairman

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

Koerner added, “We fulfill and overshoot basically all regulatory requirements.”

Meanwhile, speaking to CNBC’s Hadley Gamble during a panel session in Riyadh, Saudi Arabia, on Wednesday morning, Credit Suisse Chairman Axel Lehmann declined to comment on whether his firm would need any sort of government assistance in the future.

When asked if he would rule out some kind of assistance, Lehmann answered, “That’s not the topic.”

“We are regulated, we have strong capital ratios, very strong balance sheet. We are all hands on deck. So that’s not the topic whatsoever.”

The Swiss National Bank declined to comment on Credit Suisse’s share price move, Reuters reported.

‘Material weaknesses’

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

Switzerland’s second-largest lender disclosed the observation in its annual report, which was initially scheduled for last Thursday but was delayed by a late call from the U.S. Securities and Exchange Commission.

The SEC conversation related to a “technical assessment of previously disclosed revisions to the consolidated cash flow statements in the years ended December 31, 2020, and 2019, as well as related controls.”

In late 2022 the bank disclosed that it was seeing “significantly higher withdrawals of cash deposits, non-renewal of maturing time deposits and net asset outflows at levels that substantially exceeded the rates incurred in the third quarter of 2022.”

Credit Suisse saw customer withdrawals of more than 110 billion Swiss francs in the fourth quarter, as a string of scandals, legacy risk and compliance failures continued to plague it.

Government assistance is 'not a topic' for us, Credit Suisse chairman says

Correction: This story has been updated with the correct figure for Credit Suisse’s capital raise.

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