San Francisco Frontiers - Credit Suisse bounces back but caution lingers

Shares in Switzerland's second-biggest bank closed up 19 percent at 2.02 Swiss francs, recovering some of the ground lost Wednesday on its worst-ever day on the stock exchange.

As market fears over the risk of another global banking crisis swirled, shares plunged more than 30 percent during Wednesday's trading to 1.55 Swiss francs, pushing the Swiss National Bank to come to the rescue in a bid to reassure the markets.

Hours before the stock exchange reopened, Credit Suisse announced it would borrow 50 billion francs from the SNB to reinforce the group.

The embattled bank said it was also making buyback offers on about $3 billion worth of debt.

"These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation," chief executive Ulrich Koerner said in a statement.

The Swiss government called a special meeting on Thursday at which it was briefed by the Swiss financial regulator FINMA and the SNB, the Swiss news agency ATS reported, though the government did not comment on the discussions.

- 'Little bit of panic' -

Credit Suisse's stock slide Wednesday came after Ammar al-Khudairy, chairman of its biggest shareholder, Saudi National Bank, said it would "absolutely not" raise its stake in the group due to regulatory constraints.

Khudairy said Thursday that the market panic was "unwarranted".

"If you look at how the entire banking sector has dropped, unfortunately, a lot of people were just looking for excuses," he told CNBC television.

"It's panic, a little bit of panic. I believe completely unwarranted, whether it be for Credit Suisse or for the entire market."

The SNB loan to Credit Suisse came after the central bank and FINMA issued a joint statement.

"Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks," they said, referring to the demands placed on the 30 banks worldwide deemed to be of global importance to the banking system.

These banks, dubbed too big to fail, are required to set aside additional cash to withstand shocks in the event of market turbulence.

Andreas Venditti, an analyst at Swiss investment managers Vontobel, said the Swiss authorities' intervention was a "strong and important signal".

"However, it will take time to fully regain trust in the franchise," he added.

Credit Suisse is engaged in a major restructuring programme launched last October following a series of scandals that tarnished its reputation.

In February 2021, Credit Suisse shares were worth 12.78 Swiss francs, but since then, a barrage of problems has eaten away at its market value and undermined confidence in the rejig.

Credit Suisse plans to separate its investment banking arm from the rest of its activities, and refocus on wealth management, asset management and on its Swiss domestic banking.

But the bank has continued to suffer setbacks since then as investors grew impatient to see it put its house in order.

- 'Bad news counts double' -

In its 2022 annual report released on Tuesday, Credit Suisse acknowledged "material weaknesses" in its internal controls on financial reporting.

"Credit Suisse seems to be the weakest and most vulnerable bank" in the investing universe, said analyst Dieter Hein of Baader Helvea, "for which every piece of bad news counts double".

As early as February, the bank said it expected a substantial pre-tax loss for 2023, even as it revealed a net loss of 7.3 billion francs for 2022.

When publishing its annual results, it also revealed massive withdrawals of money by its customers, amounting to 110.5 billion francs in the fourth quarter.

For analysts at financial services giant JPMorgan, the question is one of "ongoing market confidence issues" in the face of the investment banking overhaul and capital withdrawals.

"Status quo is no longer an option," it said in a note.

Its analysts were considering several scenarios, including a complete closure of its investment banking, or a takeover by another bank, with UBS, Switzerland's biggest, "the most likely".

UBS declined to comment when contacted by AFP.

V.Perez--SFF