Credit Suisse fails to reassure and collapses on the stock market

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Credit Suisse fails to reassure and collapses on the stock market

Credit Suisse has been in turmoil for two years, particularly after allegations of corruption and money laundering revealed by an international journalistic investigation.

Credit Suisse shares recorded their worst fall in history on Wednesday, despite a timid attempt by the boss of the banking giant to reassure investors, made very nervous by any sign of weakness in the sector.

Perceived as the weakest link in Switzerland, the institution saw its share price drop by up to 30% to reach a new all-time low at 1.55 Swiss francs (about CA$2.29) despite the intervention of its president, Axel Lehmann, to reassure.

At the close, it was down -24.24% and had a market capitalization of just under 6.7 billion francs (almost C$10 billion).

It's little, for one of the 30 banks in the world considered too big to fail.

At a conference for the banking industry in Saudi Arabia, the president of Credit Suisse, Axel Lehmann, assured that the bank did not need government assistance.

That is not a subject, he said, pointing out that Credit Suisse relied on solid financial ratios, without however managing to reassure the markets.

The Swiss financial authorities and government remained silent throughout the day.

But according to the Financial Times, citing three anonymous sources, Credit Suisse unsuccessfully requested a gesture of support from the Swiss Central Bank and the market authority, FINMA.

The concern goes beyond the borders of the Alpine country and the US Treasury Department said it was monitoring the situation and being in contact with its international counterparts.

In France, Prime Minister Élisabeth Borne publicly called on the Swiss authorities to fix the bank's problems and indicated that her finance minister would speak to her Swiss counterpart again today.

This dizzying fall in the stock began after statements by the president of the Saudi National Bank, the largest shareholder in Credit Suisse.

The Saudis flew to the bank's aid by entering its capital in November. But the Saudi National Bank has absolutely no intention of injecting more money for several reasons, explained Ammar Al-Khudairy, its president.

The simplest is regulatory issues, he said. The Saudi National Bank holds a 9.8% stake. But under Swiss law, FINMA would have to decide if it crossed the 10% threshold.

In an interview with Reuters, Mr. Al-Khudairy s& #x27;is however said to be very happy with the restructuring program of Credit Suisse, evoking a very solid bank.

Founded in 1856, the Crédit Suisse bank is a pillar of the Swiss financial center which has contributed both to the rise of rail in the country and to the emergence of insurance giants. such as Swiss Re or Swiss Life or to the financing of large industrial companies, including the ancestor of ABB.

But Credit Suisse has been in turmoil for two years since the bankruptcy of the British financial company Greensill which had marked the beginning of a series of scandals having weakened the bank.

Since March 2021, the action has lost more than 83% of its value.

The pressure on Credit Suisse has hit an already jittery market, Rabobank analyst Jane Foley told AFP.

The new shareholder's statements have struck a chord as investors worry about the risk of contagion following the collapse of US bank SVB.

It seems that there are increasingly worried investors, Finalto analyst Neil Wilson pointed out in a market commentary.

But if Credit Suisse were to face existential problems, then we would be faced with something from a whole other dimension. It really is too important to let go, he insisted.

Unlike Silicon Valley Bank (SVB), which went bankrupt last week, Credit Suisse is one of 30 banks globally considered too big to fail, putting it stricter regulations to be able to withstand the shock in the event of difficulty.

Contacted by AFP, the Swiss Central Bank, which did not respond to the ; moment not expressed, did not wish to comment.

Credit Suisse launched a major restructuring program in October in an attempt to recover. But some shareholders ended up throwing in the towel, like the American investment company Harris Associates, long its largest shareholder, which revealed last week that it had sold its entire stake in the company. bank.

In early February, Credit Suisse disclosed a net loss of 7.3 billion Swiss francs (approximately C$10.8 billion) for fiscal year 2022 on background of massive withdrawals of funds from its clients and had warned to still expect a substantial pre-tax loss in 2023.

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