Credit Suisse shares slip despite moves to soothe investor concerns

  • Credit Suisse caught in market turmoil ahead of overhaul
  • Shares fell 10% in early trading on Monday
  • The Bank’s euro-denominated bonds hit historic lows
  • Swiss bank says its capital and liquidity are strong

ZURICH, October 3 (Reuters) – Credit Suisse (CSGN.S) Shares fell 10% on Monday, reflecting market concerns ahead of a restructuring plan due to be released in late October along with third-quarter results.

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

Credit Suisse’s recent problems were well known and there were no major recent developments, the source added.

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

Chief executive Ulrich Koerner told staff last week that Credit Suisse, whose market capitalization fell to 9.73 billion Swiss francs ($9.85 billion) on Monday, had strong capital and liquidity. Read more

And bank executives spent the weekend reassuring large customers, counterparties and investors about its liquidity and capital, the Financial Times reported on Sunday. Read more

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

Credit Suisse’s euro-denominated bonds fell to historic lows, with the Swiss bank’s longer-term bonds suffering the biggest declines. Read more

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

The logo of Swiss bank Credit Suisse is seen at an office building in Zurich, Switzerland September 2, 2022. REUTERS/Arnd Wiegmann/File Photo

He said he was considering steps to bolster his flagship wealth management franchise, downsize his investment bank to a “small-cap, advisory-focused” business and assess strategic options for the securitized products business. .

Citing people familiar with the situation, Reuters reported last month that Credit Suisse was probing investors for fresh cash as it attempted its overhaul. Read more

‘HEALTHY’ LIQUIDITY

JP Morgan analysts said in a research note that, based on its financial statements at the end of the second quarter, they consider Credit Suisse’s capital and liquidity to be “sound.”

Given that the bank has indicated its near-term intention to maintain its CET1 capital ratio at 13-14%, the end-of-Q2 ratio is well within this range and the liquidity coverage ratio is well above the requirements, the analysts added.

Credit Suisse had total assets of 727 billion Swiss francs ($735.68 billion) at the end of the second quarter, including 159 billion francs in cash and receivables from banks, while 101 billion were trading assets, he noted.

While Credit Suisse CDS spreads have widened, this should be seen in the context of widening credit spreads in the sector, which was expected in a rising interest rate environment with macroeconomic uncertainty. lingering, analysts said.

In the past three quarters alone, Credit Suisse’s losses have amounted to almost 4 billion Swiss francs. Given the uncertainties, the bank’s funding costs have skyrocketed. Deutsche Bank analysts in August estimated a capital shortfall of at least 4 billion francs.

Shares of Credit Suisse, which have more than halved this year, came off their morning lows and fell 7.4% to 3.68 Swiss francs at 0927 GMT.

($1 = 0.9882 Swiss francs)

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Reporting by Michael Shields and Oliver Hirt in Zurich; Additional reporting by Lucy Raitano and Huw Jones in London; Editing by Noele Illien, David Goodman and Alexander Smith

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