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Credit Suisse shares slide despite moves to calm investor fears

Credit Suisse shares slide despite moves to calm investor fears

  • Credit Suisse fell into market turmoil before its renewal
  • Shares fell as much as 10% in early trading on Monday
  • Euro-denominated bank bonds hit record lows
  • Swiss bank says its capital and liquidity are strong

ZURICH, October 3 (Reuters) – Credit Suisse Bank (CSGN.S) Shares fell as much as 10% on Monday, reflecting market concerns ahead of a restructuring plan set to bring in third-quarter results at the end of October.

A source familiar with the situation said that the Swiss regulator FINMA and the Bank of England in London, where the lender has a main position, were monitoring the situation at Credit Suisse and working closely together.

The source added that Credit Suisse’s recent problems are well known and there have been no major developments recently.

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The Bank of England, FINMA and the Swiss Finance Ministry declined to comment.

Chief Executive Ulrich Koerner told employees last week that Credit Suisse, whose market value fell to 9.73 billion Swiss francs ($9.85 billion) on Monday, has strong capital and liquidity. Read more

The Financial Times reported on Sunday that bank executives spent the weekend reassuring major clients, counterparties and investors about liquidity and capital. Read more

A spokesperson for Credit Suisse declined to comment on the FT’s report, which said the weekend calls followed a sharp rise in spreads on credit default swaps (CDS), which provide protection against the company’s default.

Credit Suisse’s euro-denominated bonds fell to record lows, as the Swiss bank’s longer-dated bonds suffered the biggest drops. Read more

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In July, Credit Suisse announced its second strategic review in a year and replaced its CEO, bringing in restructuring expert Koerner to scale back investment banking and cut costs by more than $1 billion. Read more

The Swiss bank Credit Suisse logo appears in an office building in Zurich, Switzerland on September 2, 2022. REUTERS/Arnd Wegmann/File Photo

It said it is considering measures to strengthen its flagship wealth management franchise, downsize its investment bank to a “light capital and advisory-led” business, and is evaluating strategic options for its securitized products business.

Citing people familiar with the situation, Reuters reported last month that Credit Suisse was looking to investors for fresh money while trying to fix it. Read more

healthy fluidity

JPMorgan analysts said in a research note that, based on its financial statements at the end of the second quarter, they see Credit Suisse’s capital and liquidity as “healthy.”

Analysts added that given that the bank has indicated a near-term intention to maintain the CET1 capital ratio at 13-14%, the end of the second quarter ratio is within this range and the LCR is well above requirements.

He noted that Credit Suisse’s total assets amounted to 727 billion Swiss francs ($735.68 billion) at the end of the second quarter, of which 159 billion francs were in cash and due from banks, while 101 billion francs were commercial assets.

Analysts said that while Credit Suisse’s spreads widened, this should be viewed in the context of expanding credit spreads across the sector, which would have been expected in an environment of higher interest rates as macroeconomic uncertainty persists.

Over the past three quarters alone, Credit Suisse’s losses have increased by nearly CHF4 billion. Given the skepticism, the bank’s financing costs soared. Deutsche Bank analysts in August estimated the capital shortfall at at least CHF4 billion.

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Shares of Credit Suisse, which have fallen by more than half this year, slipped from their early morning lows and fell 7.4% to CHF3.68 at 0927 GMT.

(1 dollar = 0.9882 Swiss francs)

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(Michael Shields and Oliver Hurt report from Zurich); Additional reporting by Lucy Raitano and Hugh Jones in London. Editing by Noel Ellen, David Goodman and Alexander Smith

Our criteria: Thomson Reuters Trust Principles.