- Credit Suisse was caught in the market turmoil before the renewal
- Shares fell as much as 10% in early trading on Monday
- Bank bonds denominated in euros reach historic lows
- The Swiss bank says its capital and liquidity are strong
ZURICH, Oct 3 (Reuters) – Shares in Credit Suisse ( CSGN.S ) fell as much as 10 percent on Monday, reflecting market concerns ahead of a restructuring plan that will have third-quarter results at the end of October
Swiss regulator FINMA and the Bank of England in London, where the lender has a major hub, were monitoring the situation at Credit Suisse and working closely together, a source familiar with the situation said.
Credit Suisse’s recent problems were well known and there have been no major recent events, the source added.
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The Bank of England, FINMA and the Swiss finance ministry declined to comment.
Chief Executive Ulrich Koerner told staff last week that Credit Suisse, whose market capitalization had fallen to 9.73 billion Swiss francs ($9.85 billion) on Monday, has solid capital and liquidity. Read more
And the bank’s executives spent the weekend reassuring big customers, counterparties and investors about its liquidity and capital, the Financial Times reported on Sunday. Read more
A spokesman for Credit Suisse declined to comment on the FT report, which said the weekend calls followed a sharp rise in spreads on the bank’s credit default swaps (CDS), which provide protection against a company that defaults on its debt.
Credit Suisse’s euro-denominated bonds fell to record lows, with the Swiss bank’s long-term bonds suffering the steepest declines. Read more
In July, Credit Suisse announced its second strategic review in a year and replaced its CEO, bringing in restructuring expert Koerner to shrink investment banking and cut more than $1 billion in costs. Read more
The logo of Swiss bank Credit Suisse is seen on an office building in Zurich, Switzerland, September 2, 2022. REUTERS/Arnd Wiegmann/File Photo
It has said it is considering steps to strengthen its flagship wealth management franchise, shrink its investment bank to an “equity-light, advisory-led” business and evaluate strategic options for the securitized products business.
Citing people familiar with the situation, Reuters reported last month that Credit Suisse was looking to investors for cash as it attempted its overhaul. Read more
“HEALTHY” LIQUIDITY
Analysts at JP Morgan said in a research note that based on its financial data at the end of the second quarter, they view Credit Suisse’s capital and liquidity as “salty”.
Given that the bank has indicated a near-term intention to maintain its CET1 capital ratio at 13-14%, the end-of-Q2 ratio is within this range and the liquidity coverage ratio is well under on requirements, the analysts added.
Credit Suisse had total assets of 727 billion Swiss francs ($735.68 billion) at the end of the second quarter, of which 159 billion francs were cash and due from banks, while 101 billion were trading assets, it noted.
While Credit Suisse’s CDS spreads have widened, this should be seen in the context of widening credit spreads across the sector, which was expected in an interest rate environment at rise with continued macroeconomic uncertainty, analysts said.
Over the past three quarters alone, Credit Suisse’s losses have totaled nearly 4 billion Swiss francs. Faced with uncertainties, the bank’s funding costs have increased. Deutsche Bank analysts estimated in August a capital shortfall of at least 4 billion francs.
Credit Suisse shares, which have more than halved this year, were off their morning lows and were down 7.4 percent at 3.68 Swiss francs by 0927 GMT.
($1 = 0.9882 Swiss francs)
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Reporting by Michael Shields and Oliver Hirt in Zurich; Additional reporting by Lucy Raitano and Huw Jones in London; Editing by Noele Illien, David Goodman and Alexander Smith
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Michael Shields
Thomson Reuters
The Switzerland and Austria Bureau Chief leads a multimedia team of journalists based in Zurich, Geneva and Vienna covering Swiss and Austrian news, features, images and video with reporting experience from dozens of countries on three continents from 1987