Credit Suisse Group shares fell as much as around 10% making it the biggest yearly drop in its history
Credit Suisse Group hits record low after attempts to reassure its financial stability. Credit Suisse Group shares fell as much as around 10% making it the biggest yearly drop in its history. The bank has lost about 60% of its market value this year alone providing instability to its financial conditions. Ulrich Koerner, Chief Executive Officer of Credit Suisse recognized that the firm was facing a “critical moment” as the firm worked towards its latest overhaul plans while talking about the bank’s capital levels and liquidity.
Ulrich Koerner also stated that the employees will receive regular updates until the firm releases a strategic plan which will be announced by the firm on October 27 due to the assumptions surrounding the firm. Credit Suisse sent around the talking points to executives dealing with clients who inquire about the credit default swaps, which offer protection against a company’s defaulting that signifies worries over the firm’s financial condition. Credit Suisse is making several changes that could bring forward several changes to the bank, including cutting thousands of jobs over several years.
The CEO has gone through several banker exits, capital doubts, and market speculations since July. The cost of insuring the firm’s bond against default climbed to around 15% which is the highest the lender has seen since 2009. The firm’s market capitalization dropped to around 9 million Swiss francs, Swiss francs meaning that any market share would be highly dilutive to longtime holders.
Several analysts at Keefe, Bruyette & Woods(KBW), an investment banking firm estimated that the firm may be required to raise nearly 4 billion Swiss francs of capital even after selling assets to fund growth efforts and any restructuring that is required. The bank executives have taken into account that the firm’s 13.5% CETI capital ratio at June 30 was around the middle of a planned range of 13% to 14% for 2022.
The annual report of Credit Suisse for the year 2021 stated that the firm’s international regulatory minimum ratio laid at 8% while there was a required minimum of more than 10% by the Swiss authorities. The KBW analyst drew comparisons with the crisis that Deutsche Bank AG had six years ago when the firm was facing questions about its short-term concerns and its strategies regarding the amount of a settlement to the end US probe related to mortgage-backed securities. Deutsche bank had witnessed its debt rating downgraded, clients, stepping back from working with the bank along with credit default swap climbing.
The five-year credit default, when we look at Credit Suisse swaps price of about 250 base points which climbed up from 55 base points at the beginning of the year is nearing its highest on record. These figures indicate the reduction in discernments of creditworthiness for the bank in the present situation. The difference between both these financial institutions is that Credit Suisse faces multiple issues and Deutsche bank had a key capital ratio of 13.5% is higher than the 10.8% that the German firm. Ulrich Koerner had sent memos to its employees reassuring them of the firm’s capital position and liquidity.
About Credit Suisse
Credit Suisse is a global wealth manager which is headquartered in Zurich, Switzerland and has a global reach extending to more than 40 countries with thousands of employees from over 150 nations. The firm specializes in private banking, wealth management, and investment banking. Credit Suisse partners across countries and regions to provide financial solutions to clients.