A Credit Suisse Group AG office building at night in Bern, Switzerland, Wednesday, March 15, 2023.
Stefan Wermuth | Bloomberg | Getty Images
Swiss credit shares fell 12% on Friday, after up from the previous session as the troubled lender said borrow up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank.
The intervention this week by Swiss authorities, who also reaffirmed that Credit Suisse meets the capital and liquidity requirements imposed on “systemically important banks”, sent shares jumping more than 18% on Thursday after closing at an all-time low on Wednesday. Credit Suisse has also offered to buy back approximately 3 billion francs of debt, involving 10 senior debt securities denominated in US dollars and four senior debt securities denominated in euros.
Wednesday’s slide to the bottom came after the top investor, the The Saudi National Bank unveiled it would no longer provide liquidity to the bank due to regulatory requirements, worsening a downward spiral in Credit Suisse’s share price that began with the report of its annual results on financial reporting concerns.
The bank is undergoing a massive strategic overhaul aimed at restoring stability and profitability after a litany of losses and scandals. The restructuring involves the spin-off of the investment bank to form US company CS First Boston, a sharp reduction in exposure to risk-weighted assets and a $4.2 billion capital raise funded in part by the 9.9% stake acquired by the Saudi National Bank.
However, capital markets and stakeholders seem unconvinced. The share price has fallen sharply over the past year and Credit Suisse has seen huge outflows of assets under management, losing around 38% of its deposits in the fourth quarter of 2022. Credit Default Swapswhich insures bondholders against corporate default, hit new highs this week.
According to the CDS rate, the bank’s default risk reached crisis levels, with the 1-year CDS rate jumping nearly 33 percentage points to 38.4% on Wednesday, before ending Thursday at 34.2. %.
Charles-Henry Monchau, chief investment officer at Syz Bank, said Credit Suisse needed to go further to restore investor confidence.
“This support from the SNB and the statement from regulators indicates that Credit Suisse in its current form will continue,” he said in a note Thursday.
“However, these measures are not enough for Credit Suisse to be completely off the hook; it’s about restoring market confidence through a complete exit from investment banking, a full guarantee on all deposits by the SNB, and an injection of equity to give Credit Suisse time to restructure.”