At the close of the Swiss Stock Exchange, the title of the number two Swiss bank sank 24.2% to 1.697 francs, catching up somewhat after a new historic low of 1.55 francs and in a large volume of 497, 3 million shares traded. Since the start of the year, registered shares have lost 38.4%.
Market capitalization also continued to collapse to 6.8 billion francs, compared to 59 billion of rival UBS or 11.3 billion of Julius Bär. For Jean-Paul Jeckelman, director at the Bonhôte bank, this stock market fall is part of a movement of loss of confidence in financial stocks. “This drop in confidence is particularly in the weakest companies as is the case in Switzerland with Credit Suisse. These companies are heckled following the bankruptcy of the Sillicon Valley Bank (SLB) which took place last week. “, he explained Wednesday in Forum.
For Jean-Paul Jeckelman, however, we cannot yet speak of bankruptcy but rather of a potential liquidity crisis. “At this stage, we have no information that tells us that Credit Suisse is not solvent. There is a crisis of confidence. If all customers empty their current accounts, Credit Suisse could suffer a crisis of liquidity, which is not total bankruptcy”.
He also calls on customers not to panic. “Most of the assets of Credit Suisse clients are guaranteed, up to 100,000 francs. This is thanks to the deposit guarantee. Securities are not affected either”.
Generalized risk aversion
This fall is part of a generalized movement of risk aversion affecting bank securities, write analysts from Capital Economics in a commentary. “While financial markets seemed to have calmed down after the saga (of the bankrupt Californian bank) SVB, the sell-off of bank securities in Europe resumed this morning on fears about the solidity of Credit Suisse”, have they pointed out.
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In France, Prime Minister Elisabeth Borne asked the Swiss authorities to solve the problems of the establishment of the Paradeplatz. “This subject is the responsibility of the Swiss authorities. It must be settled by them,” she told the Senate.
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This new fall comes after a series of bad news for the banking sector in general and for Credit Suisse in particular since Monday. The main shareholder of Credit Suisse, the Saudi Arabian National Bank (SNB), thus ruled out new support for the ailing Zurich bank on Wednesday. “We are in a period where investor sensitivities are very high and each news can be interpreted in different ways.
Asked on Bloomberg TV about possible new financial aid to Credit Suisse, the president of SNB, Ammar Al Khudairy replied “it is clearly no for several reasons, among which are regulatory and statutory reasons”.
No government assistance desired
During a conference for the banking sector in Saudi Arabia, its president Axel Lehmann assured that the bank does not need government assistance.
It is “not a subject”, he declared, stressing that the bank relies on “solid financial ratios”, without however managing to reassure the markets.
Credit Suisse announced last October a vast restructuring plan, including a capital increase of 4 billion francs. SNB was then committed to the tune of 1.5 billion, winning 9.9% of the bank’s share capital with this operation.
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On Tuesday, Credit Suisse acknowledged in its annual report that it was continuing to fight against liquidity outflows, which slowed down but did not reverse the trend. “These ebbs have stabilized at much lower levels, but have not yet reversed the trend at the date of publication of the report,” the establishment said in the document. The Zurich group suffered massive liquidity withdrawals of 123.2 billion francs last year, including 110.5 billion in the fourth quarter alone.
In early February, Credit Suisse announced a net loss of 7.3 billion Swiss francs for the 2022 financial year and warned that it was still expecting a “substantial” pre-tax loss in 2023.
Credit Suisse considered “the weak link”
The title has lost more than 80% of its value since the bankruptcy of the British financial company Greensill, which marked the start of a series of scandals which have weakened the bank.
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The bank has since continued to rack up setbacks. On Tuesday, the title was already shaken on the stock market when the bank admitted “substantial weaknesses” concerning its internal controls for its financial reports.
The markets are feverish with regard to Credit Suisse after the tremors triggered by the bankruptcy of the American bank SVB, the Swiss bank being considered as the weak link of the sector in Switzerland.
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