Credit Suisse shares tank after Saudi backer rules out further assistance
For the second day in a row, Credit Suisse shares fell to a new all-time low on Wednesday after a major shareholder in the troubled Swiss bank said it could not provide any more cash due to regulatory constraints.
Several times throughout the morning, the bank’s stock’s trading was halted as it fell for the first time below 2 Swiss francs ($2.17).
The session saw a 24% decline in the price of Credit Suisse’s shares, which were listed in Switzerland and had earlier lost more than 30% of their value. The most recent decline in Credit Suisse’s U.S.-traded American depositary receipts was about 15%.
Swiss regulators announced that Credit Suisse currently complies with capital and liquidity requirements and that the Swiss National Bank will provide additional liquidity if necessary, after the close of the European stock market.
Because of the fallout from Silicon Valley Bank, European lenders were already experiencing significant market turbulence when the share price collapse rekindled a broader sell-off among them. France’s Societe Generale, Spain’s Banco de Sabadell, and Germany’s Commerzbank were a few of the biggest decliners.
Automatic trading halts were also imposed on many Italian banks on Wednesday, including UniCredit, FinecoBank, and Monte dei Paschi.
The largest shareholder in Credit Suisse, Saudi National Bank, reportedly stated that it was unable to offer the Swiss bank any additional financial support, which caused the latest leg lower.
“We can’t because our percentage would exceed 10%. Ammar Al Khudairy, chairman of the Saudi National Bank, told Reuters on Wednesday that it was a regulatory issue. However, he went on to say that the SNB is pleased with Credit Suisse’s transformation strategy and that the bank is unlikely to require additional funding.
As part of Credit Suisse’s $4.2 billion capital raise last year, the Saudi National Bank acquired a 9.9% stake in the Swiss lender. The money was used to fund a significant strategic reorganization to enhance investment banking performance and address a long list of risk and compliance failures.
In an interview with CAN, Credit Suisse CEO Ulrich Koerner said the bank’s liquidity basis is “very, very strong,” according to a report by Reuters. We practically meet and exceed all regulatory requirements, Koerner continued.
During a panel discussion on Wednesday morning in Riyadh, Saudi Arabia, Credit Suisse Chairman Axel Lehmann declined to comment on whether his company would require any kind of government assistance in the future.
Lehmann responded, “That’s not the topic,” when asked if he would rule out providing some sort of assistance.
“We are regulated, our capital ratios are high, and our balance sheet is very solid. All hands are on deck. Therefore, that is not at all the topic.
According to Reuters, the Swiss National Bank declined to comment on the change in the share price of Credit Suisse.
Additionally, investors are still evaluating the effects of the bank’s announcement on Tuesday that it had discovered “material weaknesses” in its financial reporting procedures for 2022 and 2021.
The observation was made public in the annual report by Switzerland’s second-largest lender, which was originally intended to be released last Thursday but was postponed by a last-minute call from the U.S. Securities and Exchange Commission.
At the end of 2022, the bank disclosed that it was experiencing “significantly higher withdrawals of cash deposits, non-renewals of maturing time deposits, and outflows of net assets that were at rates significantly higher than those in Q3 2022.”The SEC discussion centered on 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.”
More than 110 billion Swiss francs were taken out of Credit Suisse’s accounts by customers in the fourth quarter as a string of scandals, legacy risk issues, and compliance issues persisted.