Wednesday’s market volatility was heightened by further Credit Suisse problems. The shares of the European bank plunged more than 20%, tumbling to an all-time low, as its largest shareholder said it could not give more support. On Tuesday, Credit Suisse reported that it had uncovered “significant flaws” in financial reporting procedures.
No more fresh money
That occurred when the head of the Saudi National Bank (SNB), Ammar Al Khudairy, stated that his institution would not inject any additional cash into Credit Suisse.
When asked on Bloomberg TV if the SNB would be willing to infuse more capital into Credit Suisse if there was another demand for more liquidity, he responded, “Absolutely not, for a variety of reasons beyond the most basic, which is legal and statutory.”
The Saudis have lost about 500 million Swiss francs on their holding over the past several months, as the bank’s stock has experienced a dramatic decline.
Credit Suisse has been the European banking industry’s problem child for numerous years. The 166-year-old bank, which combines a wealth-management business catering to the world’s elite affluent with a Wall Street investment bank, has been devastated by repeated scandals and financial losses.
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Axel Lehmann, chairman of Credit Suisse, claimed that the bank is not seeking government help and that it would be wrong to compare its current troubles to those of SVB.
Lehmann stated, “Our capital ratios and balance sheet are robust. We’ve already taken the medication,” he remarked, pointing to the late-2022-announced restructuring program.
Stress in the banking sector continues
Barclays informed customers this morning that the near-term prognosis for European banks remained unclear, citing “impossible to foresee” risks and the restrictive course of monetary policy.
As a result, five-year credit default swaps have stretched to an all-time high, signaling that the reorganization of the bank and the goal of bringing it back to profitability may be impossible at this time as the SVB-instigated financial crisis spreads.
In light of this, the Wall Street Journal reported, citing unnamed sources with knowledge of the situation, that ECB officials approached lenders it oversees on Wednesday to inquire about Credit Suisse AG’s financial exposures.
Credit Suisse weekly chart, source: author´s analysis, tradingview.com