More banking problems? Credit Suisse plunges 30% as largest shareholder withdraws support

Shares of Credit Suisse plunged to another all-time low of just CHF 1.65 ($1.79) on Wednesday after its largest shareholder, the Saudi National Bank (SNB), said it would not be able to buy any more shares in the company. .

The 30% drop has added to widespread fear that Credit Suisse may be on the brink of default.

Another bank run?

The Saudi National Bank is prohibited from investing further in the struggling bank due to regulatory restrictions, SNB Chairman Ammar Al Khudairy told Reuters on Wednesday. He currently holds a 9.88% participation in the company, just 12 basis points below his 10% ownership limit.

The news only adds to widespread industry fears that pushed bank shares lower this week, following the collapse of Silicon Valley Bank (SVB) last Friday. After the actions of US banks suffered on Monday, several European banks suffered falls on Wednesday, including France’s Société Générale (-11%) and Germany’s. commerzbank (-8.5%).

Since last year, Credit Suisse has been hit by regulatory compliance failures and scandals, strategic reviews, weak earnings reports and macroeconomic pressures. In October, the bank’s five-year Credit Default Swaps began trade at 10-year highs, meaning investors were looking for protection against a potential default.

CDS redemptions it shot itself to new highs again on Wednesday, with the market price at a 47% probability of default for the company.

WTF? Markets are now pricing in a 47% probability of default for Credit Suisse. What have I missed? pic.twitter.com/Q2MMo0T3LV

—Holger Zschaepitz (@Schuldensuehner) March 15, 2023

The bank’s shares had already fallen to new lows on Tuesday when Credit Suisse published its annual reportidentifying “material weaknesses” in its information controls and financial disclosure, just one month after publishing its worst annual loss since the 2008 financial crisis.

However, SNB’s Al Khudairy told Reuters he was happy with Credit Suisse’s restructuring plan.

“I don’t think they need extra money; if you look at their proportions, they are fine,” he said. “And they operate under a strong regulatory regime in Switzerland and in other countries.”

in a interview Speaking with CAN on Wednesday, Credit Suisse CEO Ulrich Koerner said the bank has a “very, very strong” capital and liquidity base. SVB’s CEO made similar claims last week, telling clients to “keep calm” around the bank. collapsed the next day.

The size of Credit Suisse

When discussions of a possible Credit Suisse bankruptcy began last year, analysts compared the idea of ​​repeating the consequences of Lehman Brothers in 2008.

Greg Foss, a Bitcoin enthusiast and high-yield credit trader, risk manager, and analyst for 30 years: saying that Credit Suisse is a “systemically important financial institution” and is currently in the midst of collapse.

“There is a run on the bank,” he said during an interview on Tuesday. “The wealth division is losing assets in a magnificent way… I’m not saying they’re insolvent, but I’ve seen enough banks in this situation that are insolvent.”

When SVB collapsed due to a bank run last week, the Federal Reserve stepped in on Sunday to bail out all of the bank’s depositors in order to stem market contagion. On Wednesday, the Financial Times reported that Credit Suisse was attractive to the Swiss Central Bank for their vocal support in favor of its financial position.

Caitlin Long, CEO of Custodia Bank saying that Credit Suisse “swallows Switzerland in size” and that the bank will become “the Fed’s problem” if it collapses.

1/ SAD TO SEE what is happening in my old store @CreditSuisse. It also almost went under in 2001 (which was when John Mack pulled me out of insurance stock research to help him in Zurich with the restructuring). Another example of what goes wrong when the balance is depraved☹️ https://t.co/vKE1h0GQtD

—Caitlin Long 🔑⚡️🟠 (@CaitlinLong_) March 14, 2023