The Bank Mess Goes Global


The bank mess that started in California is now going global after a Reuters report found that Credit Suisse hit a record low on March 15, 2023.

Credit Suisse (CSGN.S) hit a new record low, with its shares plummeting by nearly a quarter after its largest investor, Saudi National Bank (1180.SE), said it could not provide further financial assistance.

The Swiss lender has been struggling to recover from a series of scandals that have undermined the confidence of investors and clients. Customer outflows in the fourth quarter rose to more than 110 billion Swiss francs ($120 billion).

The Saudi lender had acquired a stake of almost 10% last year after taking part in Credit Suisse's capital raising and committed to investing up to 1.5 billion Swiss francs ($1.5 billion). However, chairman Ammar Al Khudairy said on Wednesday that the bank cannot provide more than 10% due to regulatory issues.

The cost of insuring the company's bonds against default shot up to a new record high. Five-year credit default swaps on Credit Suisse debt widened to 574 basis points from 549 bps at last close, according to data from S&P Global Market Intelligence.

Speaking at a Morgan Stanley conference, UBS (UBSG.S) CEO Ralph Hamers said that the Swiss rival has seen money inflows due to the recent market turmoil. “In the last couple of days as you might expect we've seen inflows,” he said. “It is clearly a flight to safety from that perspective, but I think three days don't make a trend.”

In its annual report for 2022, Credit Suisse said the bank had identified “material weaknesses” in controls over financial reporting and not yet stemmed customer outflows. CEO Ulrich Koerner told a conference that the bank's liquidity coverage ratio averaged 150% in the first quarter of this year - well above regulatory requirements.

Despite this, Credit Suisse’s shares fell below the 2-Swiss franc mark for the first time in Zurich as they headed for a seventh straight daily decline. Investors remain unconvinced about the bank’s ability to recover from its recent scandals and are yet to regain confidence in its financial stability.

Reuters

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