Internal document sends Credit Suisse stock plunging
Investors’ fears of seeing the number two Swiss bank sink led to the fall of its title on the stock market on Monday.
The course of credit default covers (“Credit Swap Default”, CDS) over five years for Credit Suisse soared to 250 basis points, against 60 points at the beginning of the year. (archives)
KEYSTONE/MICHAEL BUHOLZER
Credit Suisse shares briefly hit a new all-time low on Monday, dragged down by investor fears that the number two Swiss bank would sink.
The bank reiterated the date of October 27 to announce its overhaul, but it may well be forced out of the woodwork sooner than expected.
At 10:36 a.m., the Credit Suisse title fell 9.1% to 3.615 francs, in an SMI index down 1.31%. Registered shares recovered somewhat after sinking to a new low at 3.581 francs, a historically low price. Since the beginning of the year, the action has plunged more than 56%.
Friday evening, the bank had tried to reassure its employees, in the face of many setbacks. “We are in the process of restructuring Credit Suisse in the long term for a sustainable future – with significant potential for value creation”, had hammered the new CEO Ulrich Körner in an internal document for the attention of its employees, consulted by the AWP agency.
“At a Critical Moment”
The leader, who had repeated that the details of the transformation of the bank with two veils will be unveiled on October 27, also stressed that the group was “at a critical moment”. The establishment is nevertheless “on track” with its transformation project and still benefits from a level of equity and “solid” liquidity.
Markets did not hear it that way, however, as Ipek Ozkardeskaya explained. The senior Swissquote analyst recalled that the price of credit default hedges (Credit Swap Default, CDS) over five years for Credit Suisse had soared to 250 basis points, against 60 points at the start of the year, a sign of the growing nervousness of the markets.
“This means that the market is strongly pricing in a failure of one of the largest Swiss banks,” said Ms. Ozkardeskaya. “Is that possible? Yes, it is possible, but it is very uncertain”, Credit Suisse being part of the so-called systemic institutions and therefore subject to rigorous capital and liquidity requirements.
“A miracle”
Either the bank manages to recover, which amounts to “a miracle”, or it is bought out by a competitor or saved by the Confederation, listed the analyst.
Kian Abouhossein of JP Morgan is however more confident, recalling that at the end of the second quarter the bank had a sufficient level of capital and liquidity, with a “hard” capital ratio (CET1) at 13.5% and a liquidity coverage level of 191%. Credit Suisse thus has 727 billion francs in assets, including 159 billion in cash.
However, the situation seems tense at Paradeplatz, as the Financial Times reported that Credit Suisse management spent the weekend trying to reassure its large clients and investors of its financial stability. The bank reportedly refuted recent press reports about a possible capital increase, the British newspaper added, citing a bank executive.
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