Credit Suisse bank It is the second largest bank in Switzerland and hbeen in the midst of crises and problems.
These range from an abrupt loss in its balance sheet, massive withdrawal of deposits, irregularities with the presentation of its numbers and reports, as well as a problematic internal and managerial restructuring.
Today the shares are worth less than 10% of what they were worth in 2021 and 3% of what they were worth at their all-time highs.
a giant in trouble
In the last few hours, regional banks in the US have been in the spotlight as Silicon Valley Bank failed along with other banks that had to be bailed out.
However, today there was a shock on Wall Street as there are fears about the first giant of the international financial system: Credit Suisse.
Its shares plummet 25% this Wednesday and accumulate a 98% drop from their all-time highs.
It is not about any bank, rather it is the second largest bank in Switzerland, with 167 years of history.
There are several explanations to understand why the stock plummets in this way.
1. Problems in your numbers and outflow of deposits
As the first explanation for the historic collapse of the Swiss bank, Credit Suisse has been losing millions for two years in a row. In 2021 it lost more than US$1.7 billion and in 2022 the losses multiplied by 5 to US$7.7 billion.
In the midst of that major loss on balance sheets, the Swiss bank began to suffer deposit withdrawals.
In 2022 alone, it suffered withdrawals of US$ 132.8 billion.
The bank said on Tuesday that withdrawals had continued this month, even after it began a major campaign to win back customer confidence.
In order to explain the losses suffered by the bank, its exposure to risk firms that collapsed in previous years, such as the US hedge fund Archegos or the Anglo-Australian financial services firm Greensill, is highlighted.
On the other hand, the Swiss Federal Criminal Court sentenced Credit Suisse in June for failing to prevent money laundering from a Bulgarian gang of cocaine traffickers, according to Newsweek.
2. “Material weaknesses”
Investors are also continuing to assess the impact of the bank’s announcement on Tuesday that it had found “material weaknesses” in its financial reporting processes for 2022 and 2021.
The Swiss lender disclosed the observation in its annual report, which was initially scheduled for release last Thursday but was delayed due to a late call from the US Securities and Exchange Commission.
The SEC’s conversation related to a “technical evaluation of previously disclosed revisions to the consolidated statements of cash flows for the years ended December 31, 2020 and 2019, as well as related controls.”
In that sense, Credit Suisse delayed the release of its annual report from last week.
Chief Executive Ulrich Koerner is trying to push through a restructuring as an attempt to return the bank to profitability, though without success so far.
3. Loss of reputation
On the other hand, in the midst of the crisis in its balance sheets, there were also factors that affected the bank in terms of its reputation.
The crisis in its leadership ended up affecting the bank and led to the Swiss entity having to initiate a major management restructuring in the last two years.
In January of last year, the then president of the entity, Antonio Horta-Osorio, was forced to resign after it was discovered that he had traveled and attended a sporting event when he was supposedly in quarantine during the pandemic.
His successor, Alex Lehman, was recently investigated by Switzerland’s financial regulator Finma over claims made by it about the bank’s financial condition that were thought to have misled potential investors.
Lehman claimed, in statements to Swiss public radio in December, that the Zurich bank was achieving a return on its liquidity when it was, in reality, suffering from capital flight.
Today the market sees a high probability of default on Credit Suisse bonds and the insurance against default on them has skyrocketed.
4. Customer investigations
In addition to the political crisis, the Swiss bank was also investigated for having supported the capital of people linked to corruption.
Various international media outlets accused the bank of having kept fortunes of people linked to corruption for decades.
Those fortunes included those of people linked to the state oil company of Venezuela, leaders of the Middle East or senior intelligence officials of countries collaborating with the US in anti-terrorism matters.
The bank denied those accusations, but the image was ultimately affected.
5. Unsuccessful restructuring to stop the collapse
In the midst of the crisis in the company’s management, the bank decided to start an internal restructuring process.
It was started in October of last year, which included a capital increase of US$ 4.3 billion, together with the layoff of 9,000 workers worldwide and a 15% cut in its expenses.
The capital increase meant that the Saudi National Bank became the main shareholder of the firm, by investing 1,500 million francs (1,530 million euros) in shares of the entity.
Today the Saudi National Bank owns 9.9% of the shares of Credit Suisse.
The plunge in the Swiss bank’s shares came after the chairman of Credit Suisse’s largest shareholder, Saudi National Bank, said in a Bloomberg television interview that the lender was not considering increasing its investment because it would trigger regulatory rules.
After the Saudi state bank is the Qatar Investment Authority (QIA), manager of the emirate’s sovereign wealth fund, with 5.03% of the ballots, and is followed by the Saudi Olayan group, linked to a wealthy family in the Arab country. , with 5% of the shares.
In this way, the problems that the bank, protagonist of negative headlines for four years, encourages the rumors of bankruptcy and that it becomes a kind of ‘Swiss Lehman Brothers’.
The Swiss economic press is also considering the possibility that it will be absorbed by its main competitor in the country, that is, the Swiss bank UBS.
6. Adverse context
The fall in Credit Suisse shares also occurs in a context of vulnerability for the global financial system.
In the last week, Silicon Valley Bank went bankrupt at the same time that regulators in the US had to come to the rescue of several regional banks. Bank shares have collapsed by an average of 15% in recent days.
Fed rate hike which led interest rates to 4.5% in a historically aggressive manner, begins to generate shocks and crises in different parts of the economy, with these banks being the first victims.
Speaking at the Financial Sector Conference in Saudi Arabia, Swiss bank Credit Suisse Chairman Axel Lehmann said it would not be accurate to compare Credit Suisse’s woes to the recent collapse of Silicon Valley Bank, particularly as the banks are regulated differently, the news agency added.
Lehmann’s comments come as Credit Suisse’s largest shareholder, the Saudi National Bank, said it would not buy any more shares in the Swiss bank for regulatory reasons.
Source: The Chronicler-Ripe / Julián Yosovitch
