Credit Suisse shares lost more than 30 percent at times on Wednesday. On Thursday night, however, it rose again at a similarly rapid pace.
The trigger for the losses was a statement by the major shareholder Saudi National Bank. Chairman Al Khudairi ruled out further payments to the major Swiss bank. Then the Swiss National Bank intervened with a cash injection.
It is important for investors to know: the bank already had problems before the course roller coaster – and they have not yet been solved.
Credit Suisse stock plummeted on Wednesday. At times it fell by 31 percent to an all-time low of 1.55 Swiss francs. However, the prices of the major Swiss bank rose again overnight. Trading opened on Thursday around 30 percent above the previous day’s closing price.
Investors are now worried. What does the course roller coaster mean? What caused the stock to crash, and why did it bounce back afterwards? What can be expected in the future? You can read the answers to these questions here:
Why has Credit Suisse stock price fallen?
Credit Suisse is in crisis. In the fall of last year, she announced a new strategy. The major Swiss bank is currently cutting around 9,000 of 50,000 jobs worldwide. In addition, it reduces its balance sheet, spins off the investment bank and sells individual business areas.
Last Thursday, Credit Suisse postponed the publication of its annual report for 2022 and had to accept the first price losses. Since the end of last week, fears of a wave of bank failures have also been circulating on the stock markets. The trigger was the insolvency of the Silicon Valley Bank in the USA.
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On Monday, the Credit Suisse share price fell by more than 15 percent at times – it was punished more than other banks. The reason is probably a loss of confidence among investors. The bank posted a net loss of around 7.3 billion Swiss francs (7.4 billion euros) last year.
“Our financial results for 2022 were significantly impacted by the challenging macro- and geopolitical environment with market uncertainty and risk aversion on the part of customers,” says the annual report that has since been published. However, other banks were able to show profits last year.
The reason Credit Suisse stock continued to slide Wednesday was an interview Ammar Abdul Wahed Al Khudairy, chairman of the Saudi National Bank, gave to Reuters. The Saudi National Bank has been Credit Suisse’s largest shareholder for several months. Al Khudairy said his bank would not give any more money to Credit Suisse for regulatory reasons.
Why has Credit Suisse stock price gone up again?
The countermovement on Thursday is due to a cash injection from the Swiss National Bank. The central bank is making loans of up to CHF 50 billion (EUR 50.7 billion) available to Credit Suisse. Credit Suisse announced this in a Wednesday morning ad hoc notice known.
Credit Suisse is taking decisive measures to strengthen its liquidity with foresight, it says. The bank also announced that it intends to buy back bonds it raised last fall.
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What’s next for the major Swiss bank?
Thanks to the cash injection, Credit Suisse now has the time to continue its profound restructuring. The bank is on track to achieve a cost base reduction of around CHF 2.5 billion by 2025, including a reduction of around CHF 1.2 billion in 2023.
It remains to be seen whether this will actually succeed, mainly due to the severe loss of trust in recent weeks and months.
The fact that the bank is taking advantage of the central bank’s cash injection at least suggests that it needs more liquidity than it currently has available. The outflow of client funds at Credit Suisse recently reached an unprecedented level. In the fourth quarter of 2022 alone, net asset outflows amounted to CHF 110 billion.
In its annual report, the bank speaks of significant negative effects from liquidity problems and outflows of assets under management in 2022. So far this year, things don’t seem to be looking much better. “These outflows have stabilized at a significantly lower level, but have not yet started to reverse at the time of writing,” it said.
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Nevertheless, the bank seems to be continuing to meet the regulatory requirement for minimum liquidity. Against the background of the falling prices, the Swiss Financial Market Supervisory Authority Finma announced on Wednesday that Credit Suisse meets the special capital and liquidity requirements for systemically important banks.
What does this mean for investors?
Investor confidence is crucial for price development – and that has suffered in recent months. The decisive factor for the falling prices was the banking crisis in the USA and the statement by the largest shareholder that he would no longer make any more money available to Credit Suisse for regulatory reasons.
The financial injection from the Swiss National Bank was viewed positively by the markets and shareholders on Thursday. However, the rollercoaster ride of prices has shown that an investment with the bank is currently uncertain. It remains to be seen for investors how the major Swiss bank will deal with the fresh funds and whether it will succeed in a sustainable restructuring.
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