February 24, 2024
London, UK

Credit Suisse Stock Slump on Financial Strength Concerns

Credit Suisse stock CSGN

Credit Suisse stock is trading 7.11% lower at 3.64 Swiss Francs (CHF) on Zurich Swiss Exchange as investors worry about the financial health of the bank. Credit Suisse officials spend the weekend on phone calls to clients and investors trying to calm them down and reassure them about the financial strength of the bank.

On Friday, the bank’s CEO Ulrich Koerner sent a company memo noting that the stock price does not reflect the company’s capital and liquidity position. The bank is planning to announce a restructuring plan when it presents its quarterly results on October 27. Analysts expect the plan to include selling assets, job cuts and capital raising.

The stock losses were 10% during the early morning trading today hitting 3.48CHF a fresh all-time low, while the stock has lost 58% since the beginning of the year. The recent rise in interest rate charged on Credit Suisse credit default swaps (CDS) rise to 2.47%, the highest level since 2012. The Credit Suisse CDS was at 0.57% at the beginning of the year.

Is Credit Suisse too Big to Fail?

Credit Suisse’s market capitalization stands at $10.23 billion, it is the world’s 1272th most valuable company. The capitalization in 2012 was 31.51 billion, and in 200 the bank’s value was 79.13 billion. Credit Suisse is in the top 30 global significant banks.  

The Swiss bank turn to losses in 2021, (-1.65 billion CHF) mostly because of its exposure to failed Greensill and Archegos hedge fund. Credit Suisse also reported a loss of 1.8 billion Swiss francs in the first six months of 2022. The bank was profitable in 2020, reporting profits of 2.7 billion Swiss francs.  

Above the financial difficulties, the bank also faces many legal challenges and fines, from its involvement in funding the Mozambique fishing sector to authorities’ investigation for money laundering, corruption and other financial crimes.

Analysts do not expect to have a new Lehman Brothers case with the Swiss Bank but we can see intervention by the central Swiss bank or the Swiss government or can be a takeover target.  

Meanwhile, another troubled European Bank is under pressure today Deutsche Bank shares are 3.34% lower at 7.37 euros.

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