San Francisco Frontiers - Credit Suisse shares sink as top shareholder rules out more cash

Switzerland's second-biggest bank, shaken by a series of scandals, was rocked once again after Saudi National Bank chairman Ammar Al Khudairy said it would "absolutely not" up its stake, as European stock markets plunged amid renewed concerns about the banking sector.

Credit Suisse's market value had already suffered heavy falls this week over fears of contagion from the collapse of two US banks and its annual report citing "material weaknesses" in internal controls.

Credit Suisse shares were soon in freefall on the Swiss stock exchange, hitting a low of 1.71 Swiss francs just before 1100 GMT -- down 22.2 percent.

"Where one big shareholder goes, others may follow. Credit Suisse now has to come with a concrete plan to stop outflows, and do it fast," IG analyst Chris Beauchamp told AFP.

Neil Wilson, chief market analyst at trading firm Finalto, said it seemed there were "increasingly worried investors and counterparties looking at Credit Suisse".

"If Credit Suisse were to run into serious existential trouble, we are in a whole other world of pain. It really is too big to fail."

Speaking at the Financial Sector Conference in Saudi Arabia on Wednesday, Credit Suisse chairman Axel Lehmann said the bank did not need government assistance, saying it "isn't a topic".

He said it would be inaccurate to compare his bank's woes with the collapse of the US lender Silicon Valley Bank (SVB), due to the difference in regulation.

"We have strong capital ratios, a strong balance sheet," Lehmann said, adding: "We already took the medicine," referring to the bank's drastic restructuring plan revealed in October.

- Role of the regulators -

The Saudi National Bank became Credit Suisse's largest shareholder in a capital raise in November, launched to finance a major restructuring of the Zurich-based lender aimed at steadying the ship.

But Khudairy explained why the kingdom's largest commercial bank would not be putting in any more money.

"The answer is absolutely not, for many reasons outside the simplest reason which is regulatory and statutory," he told Bloomberg TV.

"We now own 9.8 percent of the bank. If we go above 10 percent, all kind of new rules kick in, whether it will be by our regulator, the European regulator or the Swiss regulator, and we are not inclined to get into a new regulatory regime," the chairman said.

Crossing the 10 percent threshold would cause a stir in Switzerland, where shareholders have already seen their stake diluted during the capital increase and continue to see the value of their investment plummet.

In February 2021, Credit Suisse shares were worth 12.78 Swiss francs, but the bank has since endured a barrage of problems.

It was hit by the implosion of US fund Archegos, which cost it more than $5 billion.

Meanwhile its asset management branch was rocked by the bankruptcy of British financial firm Greensill, in which some $10 billion had been committed through four funds.

Credit Suisse is one of 30 banks globally deemed too big to fail, forcing it to set aside more cash to weather a crisis.

The bank booked a net loss of 7.3 billion Swiss francs ($7.8 billion) for the 2022 financial year.

That came against a backdrop of massive withdrawals of funds by its clients, including in the wealth management sector -- one of the activities on which the bank intends to refocus as part of a major restructuring plan.

The markets are feverish towards Credit Suisse in the face of the tremors triggered by the bankruptcy of SVB, with the Swiss bank being considered the weak link in the sector in Switzerland.

"The pressures on Credit Suisse have hit an already jittery market," Rabobank analyst Jane Foley told AFP.

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N.Wilson--SFF