Credit Suisse sheds another 5% as traders digest emergency liquidity

Credit Suisse shares fell about 5% in early trading on Friday, after rising over the previous session when the troubled lender said it would borrow up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank.

Shares were trading 4.6% lower at 10:18 London time.

This week’s intervention by Swiss authorities, which also confirmed that Credit Suisse met capital and liquidity requirements imposed on “systemically important banks”, sent shares jumping more than 18% on Thursday after closing at a record low on Wednesday. Credit Suisse also offered to buy back about 3 billion francs worth of debt related to 10 US dollar-denominated senior debt securities and four euro-denominated senior debt securities.

The decline to Wednesday’s low came after top investor Saudi National Bank revealed it would not give the bank more money due to regulatory requirements, compounding a downward spiral in Credit Suisse’s share price that began with the delay of its annual results in relation to financial reporting. concerns.

The bank is undergoing a massive strategic overhaul with the aim of restoring stability and profitability after a series of losses and scandals. The restructuring involves the spin-off of the investment bank to form US-based CS First Boston, a sharp reduction in exposure to risk-weighted assets, and a $4.2 billion capital raising funded in part by a 9.9% stake bought by Saudi National Bank.

However, capital markets and stakeholders do not seem convinced. The share price has fallen sharply over the past year, and Credit Suisse has seen huge outflows of funds under management, losing around 38% of deposits in the fourth quarter of 2022. Credit default swaps, which insure bondholders against a defaulting company, increased to new records this week.

According to the CDS rate, bank default risk has risen to crisis levels, with the 1-year CDS rate jumping nearly 33 percentage points to 38.4% on Wednesday, before ending Thursday at 34.2%.

Charles-Henry Monchau, chief investment officer at Syz Bank, said Credit Suisse must go further to restore investor confidence.

“This support from the SNB and the statement from regulators indicates that Credit Suisse in its current form will continue,” he said in a note on Thursday.

“However, these measures are not sufficient for Credit Suisse to be completely out of trouble; it is about restoring market confidence through a complete exit of the investment bank, a full guarantee of all deposits from the SNB, and an injection of equity capital to give Credit Suisse time to restructure.”