Investor concerns led to a fall in Credit Suisse shares on Wednesday. The concerns are no longer limited to American banks such as the closed Silicon Valley Bank. Credit Suisse shares temporarily lost 30 percent in value on the Zurich Stock Exchange on Wednesday, falling to a record low of 1.55 Swiss francs. In the further course, the stock was traded at a discount of 15 percent. Other bank stocks were also pulled into the maelstrom: Deutsche Bank's share price fell by 8 percent. Commerzbank shares fell by 9 percent. The Dax lost 2.5 percent to 14,847 points.
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The fall in the price of Credit Suisse shares was triggered by the Chairman of major shareholder Saudi National Bank. In an interview with the Reuters news agency, Ammar Al Khudairy said his institution could not inject any more money into Credit Suisse for regulatory reasons. This reinforced the rumors on the stock market about liquidity problems of the bank, which is in crisis, which have been smouldering for some time.
Last year, clients withdrew 123 billion Swiss francs from their Credit Suisse accounts, most of them in October and November. Credit Suisse then sought investor confidence with a capital increase of CHF 4 billion. As part of this measure, the Saudi National Bank acquired a 9.9 percent stake in the major Swiss bank at the end of last year.
Record loss last year
Al Khudairy stressed on Wednesday that Credit Suisse does not need any money. Nevertheless, his statement caused uncertainty because the Saudi Arabian institute cannot support Credit Suisse in an emergency. Credit Suisse CEO Ulrich Körner decisively opposed the fact that such an emergency was imminent: "We are a strong bank, we are a global bank under Swiss regulation, we basically meet and exceed all regulatory requirements," he said in an interview with the Asian television channel CNA. "Our capital and liquidity base is very, very strong." Credit Suisse's situation is not comparable to Silicon Valley Bank. Chairman Axel Lehmann told the news agency Bloomberg that state aid was "not an issue" for the bank.
However, the market is increasingly doubting the stability of the institute. It looks like more and more concerned investors and counterparties are looking at Credit Suisse as a possible next shaky candidate, said Neil Wilson, market analyst at online broker Markets.com. "When Credit Suisse gets into serious existential trouble, we are in a completely different world of pain. It's really too big to fail."
The Swiss National Bank (SNB) did not want to comment on the situation at the country's second-largest bank. Ralph Hamers, CEO of UBS, Switzerland's largest bank, also kept a low profile. When asked at an investor conference if he was ready for a possible bailout for Credit Suisse, the Dutchman said he didn't want to answer hypothetical questions, adding, "What's important for us is that we really focus on our strategy, and that's an organic strategy."
Warning signs also in other securities
However, the fall in the price of Credit Suisse shares illustrates the deep crisis of confidence in which the institute finds itself. Since last Friday, when the shock waves around Silicon Valley Bank hit the stock markets for the first time, the Credit Suisse share price has fallen by 41 percent at its peak. Other key figures of the financial market also illustrate the bank's precarious situation: the risk premiums for credit default swaps (CDS) have shot up. Credit default insurance requires an annual premium of 7.67 percent.
This means that in order to secure a claim of one million euros against the institution, the investor must pay an annual premium of 76,700 euros. At Deutsche Bank 11,600 euros would be needed, at Commerzbank 8150 euros. Institutional investors use CDS in transactions with a bank to protect themselves against its failure. The higher the CDS premium, the more expensive and unattractive the business with this bank becomes. Credit Suisse bonds also suffered significant declines, pushing yields to levels that indicate increased risk of default.
The bank had already caused irritation last week when the planned publication of the annual report had to be postponed due to queries from the US Securities and Exchange Commission (SEC). The report was then published on Tuesday and once again put a damper on it: the bank had to admit significant weaknesses in the internal controls of its financial statements.
The record loss in 2022 of 7.3 billion Swiss francs had been known for some time. The Bank's weakest result in its 167-year history was attributed to the costs of restructuring and the decline in investment banking revenues. The Management Board also expects a loss for the current year. While customer outflows have slowed, they have not yet turned into inflows.