Credit Suisse shares tumble as investor concerns grow
Shares in Credit Suisse plunged to record lows this morning as fears spread over the bank’s financial stability and a charm offensive by bosses over the weekend failed to soothe investors’ concerns.
The beleaguered Swiss lender’s share price was rocked after a memo from its chief Ulrich Koerner reassuring the firm’s 45,000 global staff on Friday of the bank’s liquidity was leaked to media.
Executives at Credit Suisse were reportedly forced into a ring-around to investors over the weekend in a bid to cool speculation and restore confidence in the firm.
The efforts did little to settle fears however as shares plunged in early trading and credit default swaps (CDS), which traders buy to insure themselves against the bank defaulting on its debts, soared to record highs yesterday. The banks’s five-year CDS jumped by more than 100 basis points on Monday, with some brokers pricing the swaps at higher levels than during the 2008 financial crisis.
Credit Suisse has been reeling after a string of scandals in the past 18 months, including incurring huge losses through its exposure to the twin collapses of Archegos Capital and Greensill Capital last year.
The Prudential Regulation Authority has also been more closely monitoring the stability of the lender over the weekend in conjunction with the Swiss regulator, City PM understands.
Instability in its share price is understood to have been fuelled by Koerner’s message rather than any material change in the bank’s underlying stability however. Shares in Credit Suisse had recovered to trade down one per cent by the end of the day.
In a note on Sunday night, an analyst at Citi looked to pour cool water on the fear, saying the situation would not cause another financial crisis.
“We understand the nature of the concerns, but the current situation is night and day from 2007 as the balance sheets are fundamentally different in terms of capital and liquidity, and we struggle to see something systemic,” Citi analyst Keith Horowitz said.