The turmoil fueled fresh fears over the health of financial institutions following the collapse of two US lenders in recent days.
Geneva • Troubled Credit Suisse shares lost more than a quarter of their value on Wednesday, hitting a record low after its biggest shareholder – the Saudi National Bank – told news outlets it would stop injecting money into the troubled Swiss bank well before the default of two US lenders.
The turmoil triggered an automatic trading pause for Credit Suisse shares in the Swiss market and caused shares of other European banks to fall by up to double digits. That fueled fresh fears about the health of financial institutions following the collapse of Silicon Valley Bank and Signature Bank in the United States in recent days.
Credit Suisse shares fell more than 27% to around 1.6 Swiss francs ($1.73) in Wednesday afternoon trading on the SIX Stock Exchange. That’s more than 85% down on February 2021. Shares have suffered a long and prolonged decline: in 2007 they were trading at over 80 francs apiece.
Investors were quick to sell bank stocks on bad news, amid concerns about the possibility of more hidden problems in the banking system.
Other European banks were hurt as concerns spread across the sector: France’s Societe Generale SA fell 12%, France’s BNP Paribas fell more than 10%, Germany’s Deutsche Bank fell 8% and Britain’s Barclays Bank fell nearly 8% %. The shares of the two French banks were also briefly suspended.
The STOXX Banks Index of 21 leading European lenders fell 8.4% after relative calm in markets on Tuesday.
The fall came after the head of the National Bank of Saudi Arabia, Ammar Al Khudairy, told Bloomberg and Reuters that Credit Suisse’s main shareholder has ruled out further investments in the Swiss bank to avoid regulations that step in if it has a stake of over 10% .
Following an announcement in October, the Saudi National Bank invested around 1.5 billion Swiss francs to acquire a nearly 10% stake in Credit Suisse.
The Swiss bank pushed to raise capital from investors and adopt a new strategy to overcome a series of problems including bad bets on hedge funds, repeated top management reshuffles and a spy scandal involving Zurich rival UBS.
Speaking at a financial conference in the Saudi capital Riyadh, Axel Lehmann, Chairman of Credit Suisse, defended his bank on Wednesday when asked about management issues, saying “we’ve already taken the medicine” to reduce risk.
When asked if he would rule out government aid for the future, he said: “It’s not an issue. … We’re regulated, we have strong capital ratios, a very strong balance sheet, we’re all on board, so it’s not an issue at all.”
A day earlier, Credit Suisse reported that managers had identified “material weaknesses” in the bank’s internal controls over financial reporting as of the end of last year. That fueled new doubts about the bank’s ability to weather the recent storm.
Europe’s finance ministers said this week that their banking system would not be directly affected by US bank failures as concerns about banks grew around the world.
Analysts say that since the global financial crisis that followed the collapse of US investment bank Lehman Brothers in 2008, Europe has tightened safeguards around its banking system.
Andrew Kenningham, chief economist for Europe at Capital Economics, called Credit Suisse “a much bigger problem for the global economy” than the collapsed mid-sized US banks.
However, he noted that the “problems facing the Swiss bank are well known and therefore would not come as a complete shock to investors or policymakers.”
“The problems at Credit Suisse again raise the question of whether this is the beginning of a global crisis or just another ‘idiosyncratic’ case,” Kenningham said in a research note. “Credit Suisse has been widely viewed as the weakest link among Europe’s big banks, but it’s not the only bank that has struggled with weak profitability in recent years.”
Associated Press writers Joseph Krauss in Ottawa, Ontario, David McHugh in Frankfurt, Germany, and Angela Charlton in Paris contributed to this report.
https://www.sltrib.com/news/nation-world/2023/03/15/credit-suisse-shares-sink-global/ Credit Suisse shares fall as global fear of banks grows