During the day, the action of Credit Suisse lost up to 30% to reach a new all-time low at 1.55 Swiss francs. The bank has been in turmoil for several months. His boss, Axel Lehman can no longer reassure the markets. He can no longer even count on the first shareholder of the Swiss bank, the Saudi National Bank, which no longer intends to invest in the bank.
Credit Suisse’s problems started in its “investment banking” activities. “Unfortunately, Crédit Suisse made investments that turned out to be bad, particularly at the level of hedge funds, in particular the Archegos fund which went into a resounding bankruptcy”, explains Georges Hubner, professor of finance at HEC Liège. Swiss credit “took a slate of 5.5 billion dollars, which is quite significant“, recalls Georges Hubner.
This bankruptcy had an impact on investors, but also on customers. “In their wealth management business, Credit Suisse has seen quite a few of its clients desert for lack of confidence,” explains Georges Hubner. The bank to see its operational losses widen. “Costs remained, while revenues did not follow“, continues the professor of finance.
While 2022 was a pretty good year for the banking sector, that was not the case for Credit Suisse. “They made a loss of 7 billion Swiss francs in the year 2022“,
This loss had been known for about a month. The fall of Credit Suisse has now accelerated for several reasons. Firstly because the main shareholder, the Saudi National Bank, no longer wants to put money back in the pot. Then after the publication of the annual report where Credit Suisse mentioned having identified deficiencies in internal control. This internal control is necessary to guarantee the reliability of the information communicated to investors and which relates to the health of the bank, “mentions that we are not used to reading“, notes Georges Hubner, and which worried the stock markets.
This information, while the stock markets are already on the alert after the bankruptcy of two banks in the United States, cast a chill. “This vagueness, to which is added the refusal of its main shareholder to continue to help the bank, ensured that the focus was placed on Credit Suisse and dragged the entire European banking sector at the stock market level in its wake.“, analyzes Georges Hubner.