Credit Suisse is trying to reassure the financial markets. The banking establishment announced on Thursday a short-term loan of up to 50 billion Swiss francs (or roughly the equivalent in euros) from the country’s central bank. This decision comes the day after a nightmarish day for the second largest bank in the country, which 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,” said the bank’s chief executive, Ulrich Körner.
These decisions had a positive effect on the opening of the Stock Exchange. The action rebounded very strongly, from 30.82% to 2.22 Swiss francs. Several other European markets also opened the session in the green. Paris and Frankfurt thus took, respectively, +1.48% and +1.61%. London opened 1.4% higher.
On Wednesday, the title Credit Suisse fell 24.24% at the close. The group, one of 30 banks in the world considered too big to fail, was now worth just under 6.7 billion Swiss francs. After an astonishing silence, the central bank (SNB) and the policeman of the Swiss financial markets assured the group of their support on Wednesday evening. “Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks. If necessary, the SNB will make liquidity available to Credit Suisse,” the SNB and Finma (the Swiss Financial Markets Authority) said in a joint statement issued in the early evening.
The United States is “monitoring the situation”
Earlier in the day, the two most senior executives of Credit Suisse had already tried to reassure on the financial solidity of the banking giant, but without succeeding in convincing the investors who inflicted on the action of the bank the worst fall in its history. . Perceived as the weak link in Switzerland, the establishment saw its share price drop by up to 30% to reach a new historic low at 1.55 Swiss francs despite the intervention of its president, Axel Lehmann and Ulrich Körner to try to raise the bar.
For the SNB and Finma, “the current turbulence on the American banking market does not suggest that there is a risk of direct contagion for Swiss establishments”. In an interview with the Channel News Asia television channel, Ulrich Körner made many reassuring remarks. “We are a solid bank; we are a global bank under Swiss regulation. We meet and exceed virtually all regulatory requirements. Our capital, our liquidity base is very, very strong.” However, the concern goes beyond borders and the US Treasury said it was “monitoring the situation and being in contact with its international counterparts”.
An establishment with structural difficulties
Investors remain worried this Thursday morning, the Asian stock markets having opened sharply lower in the wake of the unscrewing of European markets (-3.58% in Paris on Wednesday and -3.83% in London). The vertiginous fall of the title began after statements by the president of the Saudi National Bank, the largest shareholder of Credit Suisse. The Saudis flew to the bank’s rescue by entering its capital in November 2022. But the Saudi National Bank has “absolutely no” plans to inject more money, mainly for regulatory reasons. The Saudi National Bank holds a 9.8% stake. But under Swiss law, Finma would have to decide if it crossed the 10% threshold.
Credit Suisse has been in turmoil since the bankruptcy of British financial firm Greensill, which marked the start of a series of scandals. Since March 2021, the stock has lost more than 83% of its value. “The pressure on Credit Suisse has hit an already nervous market,” said Rabobank analyst Jane Foley. Investors are worried about the risk of contagion after the bankruptcy of the American bank SVB. But if Credit Suisse were to face “existential problems”, then “we would be facing something of a whole other dimension”, underlined Neil Wilson, analyst at Finalto in a market commentary.
As one of the institutions deemed too big to collapse, Credit Suisse is subject to strict regulations in order to withstand the shock in the event of difficulty. The bank launched a restructuring program in October 2022 to try to recover. But some shareholders ended up throwing in the towel. In early February, Credit Suisse disclosed a net loss of 7.3 billion Swiss francs (nearly 7.4 billion euros) for the 2022 financial year and warned to still expect a “substantial” pre-tax loss in 2023.