Senior Credit Suisse executives spent the weekend reassuring major clients, counterparties and investors about the Swiss bank’s liquidity and capital position in response to concerns about its financial strength.
Executives phoned after bank spreads credit default swapswhich provide protection against a company’s default, rose sharply on Friday, indicating investor concerns about its financial health.
“Teams are actively engaging with our key customers and counterparties this weekend,” said a Swiss credit executive involved in discussions. “We are also getting incoming calls from our top investors with messages of support.”
The executive has denied recent Press articles that Credit Suisse had formally approached investors about the possibility of raising more capital, insisting the bank was trying to avoid such a move with its share price at record highs and borrowing costs higher due to rating downgrades.
After watching Credit Suisse’s share price fall more than 25% last month to less than 4 Swiss francs, chief executive Ulrich Körner sent a company-wide note on Friday in an attempt to reassure staff on the bank’s capital position and liquidity.
But shares were under pressure in early trading on Monday, falling 9% to SFr3.61 in Zurich.
Körner’s move also follows a sharp rise in credit default swaps, an indicator of investor sentiment towards risk, which jumped more than 50 basis points in the past two weeks, hitting 250. basis points on Friday.
In a subsequent briefing note on matters to discuss with clients sent to Credit Suisse executives on Sunday, following rumors about the bank’s financial health on social media, staff were told: “A matter of concern for many stakeholders, including media speculation, continues to be our capitalization and financial strength.
“Our position on this is clear. Credit Suisse has a strong capital and liquidity position and balance sheet. The evolution of the share price does not change this fact.
A senior company executive contacted by Credit Suisse said his view was that the lender was “the worst big bank in Europe” but was not in immediate danger.
“We don’t have any meetings on this subject,” he said. “I don’t think it’s a crisis.” The bank’s share price plunge reflects its deep woes and the lack of any obvious solution, the executive said.
While the local Swiss bank is highly profitable and the global private bank still has a strong brand, potential investors and buyers fear that the investment banking arm has hidden costly liabilities.
Körner and the bank’s board, chaired by former UBS executive Axel Lehmann, are due to present a company reorganization plan on October 27 to address investor concerns, along with its third-quarter results. .
Deutsche Bank analysts estimated last month that the restructuring would leave a CHF4 billion hole in Credit Suisse’s capital position.
“We will be doing some asset sales and divestitures just to be able to fund this very strong pivot that we intend to achieve towards stable business,” said the bank’s senior executive involved in the investor calls.
Credit Suisse declined to comment.
Korner, who previously led Credit Suisse’s asset management business, was named chief executive over the summer with a mission to break up the group’s investment bank and cut costs – moves likely to result in thousands of job cuts.
The council’s latest plan is to split the investment bank in three and resuscitate a “bad bank” for high-risk assets and business units held for sale, the Financial Times reported.
“No doubt there will be more noise in the markets and in the press by the end of October,” Körner wrote on Friday. “All I can tell you is to stay disciplined and stay as close as ever to your clients and colleagues.”
Uncertainty over the bank’s future has already led to a number of executive departures. Jens Welter, who was co-head of Global Banking, is the most recent high level defectorhaving agreed to join Citigroup.
Additional reporting by Brooke Masters in New York