KEYSTONE
Record-low share value, speculative transactions, billions in fines, bad numbers, layoffs: the negative headlines about CS don’t stop. What’s next for the second largest Swiss bank?
One Credit Suisse share was worth CHF 3.74 this morning. This is a new record low and marks a drop in value of more than 60 percent since the beginning of the year.
The current fall in prices is preceded by negative headlines about the management of the bank, speculative transactions in investment banking that are causing losses, and write-downs for the subsequent legal disputes and rumours.
The bank closed 2021 with a net loss of CHF 1.7 billion. And this year it’s going to be even harder: in the second quarter, the big bank was already posting a loss of almost CHF 1.5 billion.
In particular, the suspicion of a possible capital increase fueled the recent price collapse. As a result, the bank is currently worth barely 10 billion on the stock exchange. For comparison: UBS is worth almost five times as much.
The rumor mill is churning
No wonder, then, that the rumor mill is churning about how things will continue with the second largest bank in Switzerland. Capital increases, bailout, restructuring of the investment banking business, major layoffs?
Hans Geiger knows Credit Suisse well from the time when he was a member of the bank’s management board. “Credit Suisse has failed,” says the emeritus banking professor at the University of Zurich.
By that he means the board of directors. According to the Banking Act, the body is responsible for the overall management, control and supervision of the bank, including strategy.
«Credit Suisse can’t do investment banking, it’s now flying in the face.»
Sticking to the speculative investment business
While other banks learned from the financial crisis of 2008 and adjusted their investment banking strategies, particularly UBS, Credit Suisse simply continued to speculate and carried on as before. Investment banking is an American business and difficult terrain for Swiss banks, he explains and says: “Credit Suisse can’t do investment banking, it’s flying in your face now.”
“Actionable” contingency plan
Nevertheless, the economist does not want to paint the future of the big bank too bleakly. According to the management report published by the Swiss Financial Market Supervisory Authority Finma in spring 2022, Credit Suisse’s emergency plan is “feasible”.
Finma reviews the plans of the systemically important financial institutions UBS, Postfinance, Raiffeisen, Zürcher Kantonalbank and Credit Suisse every year. In the emergency plans, banks must show how they can guarantee uninterrupted access to deposits and payment transactions and how they can continue to do so in times of crisis. What exactly is in the respective emergency plans is not known to the outside world.
Because of this assessment by Finma, Geiger also assumes that Credit Suisse will not receive a rescue package. Rather, investors would have to bring in capital. The only question is whether they want that. That’s why there’s nothing left but to cut investment banking, says Geiger, adding: “It can’t be that the state has to help just because the management has overslept changing their strategy.”
Far-reaching strategy change announced
The board of directors is under pressure and seems to be aware of it. That is why he has announced a far-reaching change in strategy, which is to be communicated with the third quarterly figures on October 27th.
Because the bank continues to lose value, it published a statement yesterday in the hope of reassuring investors, but also employees. One had “made good progress with the strategic review”. The bank is also examining disposals and sales of assets. The extent to which speculative investment banking will be affected remains to be seen. Geiger says the bank has no choice but to sell this business in the US.
Credit Suisse will continue to exist
Geiger is convinced that Credit Suisse will continue to exist. According to Geiger, the banking system in Switzerland works well. Politicians, the Swiss National Bank and Finma have done their homework and care is being taken to ensure that the systemically important functions in the Swiss unit are continued without interruption, said Geiger.