The bank is also making offers for up to three billion Swiss francs of senior debt for cash. The bank’s bonds had come under pressure because of concerns about the stability of the institute. Credit Suisse is now using the lower prices to buy back the shares. It also saves on interest costs.
Hours earlier, after a dramatic fall in the share price, the SNB had offered the bank support and at the same time emphasized that CS met the capital and liquidity requirements placed on systemically important banks. We are following developments closely and are in close contact with the Swiss Ministry of Finance to ensure financial stability. Credit Suisse is the first global systemically important bank to receive tailored help since the financial crisis.
Bank manager thanks for trust
Bank boss Ulrich Körner thanked the SNB and the Swiss financial market supervisory authority Finma for their support. The measures will strengthen the bank in order to create added value for customers and other stakeholders. “My team and I are determined to move quickly to create a simpler and more customer-centric bank.”
After numerous scandals, Credit Suisse is in the middle of a far-reaching corporate restructuring that will cost billions and include the loss of 9,000 jobs. In the end, a bank should be created that primarily focuses on business with millionaires and billionaires and no longer on risky investment banking. Trust is a crucial prerequisite, especially for business with wealthy private customers.
Shares plummeted on Wednesday
This has recently been shaken again and again. The already battered shares of the crisis-ridden institute collapsed by more than 30 percent on Wednesday to an all-time low of 1.55 francs and dragged the stock exchanges worldwide into the red. The crash was initially driven by concerns that the shockwaves on the financial markets triggered by the collapse of California’s Silicon Valley Bank (SVB) could affect the already weakened Credit Suisse.
On Wednesday, the new major shareholder Saudi National Bank announced in a Reuters interview that it would not be able to inject fresh funds into Credit Suisse. The institute cannot hold more than ten percent of the shares for regulatory reasons, President Ammar Al Khudairy told the Reuters news agency. The Saudi bank has been the new major shareholder of CS since autumn 2022 as part of a capital increase with around ten percent of the shares.
More bank stocks in the red
According to the Wall Street Journal (“WSJ”), the European Central Bank (ECB) has also contacted the banks it monitors about their exposure to Credit Suisse. In addition to CS, a number of other bank stocks, such as UBS, the largest Swiss bank with more than eight percent, also fell deep into the red on Wednesday. However, as Reuters reported with reference to people familiar with the matter, the problems at CS are probably more home-made than systemic.
The “Tagesanzeiger” referred on Wednesday to the annual report of the Swiss CS subsidiary, which was only published the day before. As can be seen from this, CS is also struggling here with outflows of money running into the billions. “Within a year, customers withdrew around 28 percent of their deposits from the big bank. That’s around 51 billion francs (around 52 billion euros, note),” according to the newspaper, according to which the Swiss home market “so far has been considered a safe anchor for the ailing big bank”.
Deficiencies in financial reporting
Finally, in the annual report published with a delay on Tuesday, there was also talk of deficiencies in the internal control of financial reporting. CS actually wanted to publish the annual report on Thursday of last week. However, an intervention by the US Securities and Exchange Commission (SEC) prompted the institute to postpone publication. The SEC saw a need for clarification on technical aspects of accounting and related control mechanisms.
The bank has now announced that precautions to identify misstatements in financial reporting were insufficient. Auditor PricewaterhouseCoopers (PWC) came to a similar conclusion. Nevertheless, the bank confirmed the financial results for fiscal years 2022, 2021 and 2020.
With a loss of CHF 7.3 billion, the institute recorded one of the weakest years in its 167-year history in 2022. Above all, the costs for the restructuring and the collapse of income in investment banking weighed on the result. The group expects a significant pre-tax loss in the current year as well.
