Credit Suisse falls another 9% as traders soak up extreme liquidity

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

Stefan Wermuth | Bloomberg | Getty Images

Swiss loan Shares fell 9% on Friday after the lender, which rallied in the previous session, said it would borrow up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank.

This week’s intervention by Swiss authorities, which also confirmed that Credit Suisse is meeting capital and liquidity requirements for “systemically important banks”, sent the stock up more than 18% on Thursday after closing at record lows on Wednesday. Credit Suisse has also offered to buy about 3 billion francs of debt on 10 senior US dollar-denominated debt securities and four euro-denominated senior debt securities.

Wednesday’s drop to record lows came after the National Bank of Saudi Arabia said a leading investor would no longer provide cash to the bank due to regulatory requirements, deepening a slide in Credit Suisse’s share price that began with a delay in its annual results due to financial reporting. anxiety.

The bank is undergoing a major strategic overhaul aimed at restoring stability and profitability after numerous losses and scandals. The restructuring included the spin-off of the investment bank to form US-based CS First Boston, a sharp reduction in exposure to risk-weighted assets and a $4.2 billion capital increase, partially funded by a 9.9% stake purchased by a Saudi national. Bank.

However, capital markets and stakeholders seem less convinced. The share price has fallen sharply in the past year and Credit Suisse has seen a huge outflow of 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, have increased. new records this week.

Switzerland's second-largest bank is struggling to recover after a series of scandals and losses.

Short sellers are doubling down on these European banks — and Credit Suisse isn’t their top target

According to CDS rates, the risk of bank default has risen to crisis levels, with the 1-year CDS rate jumping nearly 33 percentage points to 38.4 percent on Wednesday, from 34.2 percent on Thursday.

Charles-Henri Monchau, Syz Bank’s chief investment officer, believes Credit Suisse needs to go further to restore investor confidence.

“This support from the NSC and the statement from the regulatory authorities indicates that Credit Suisse will continue in its current position,” he said in a note on Thursday.

“However, these measures are not enough to completely get Credit Suisse out of trouble; it is about the complete withdrawal of the investment bank, the full guarantee of all deposits by the SNB and the restoration of confidence in the market by injecting equity capital into the bank. Give Credit Suisse time to restructure.”

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