ZURICH, March 15 (Reuters) – Credit Suisse ( CSGN.S ) was on course to shed a quarter of its value on Wednesday after its largest shareholder said it could not provide further support, pushing of the CEO of the Swiss bank to make new assurances of its financial strength.
Saudi National Bank (SNB) (1180.SE), which holds 9.88% of Credit Suisse, said it would not buy more shares in the Swiss bank on regulatory grounds.
“We cannot because we will go above 10%. This is a regulatory issue,” SNB chairman Ammar Al Khudairy told Reuters.
Shares of the Swiss bank fell about 24% early afternoon on Wednesday, after hitting a new record low. The stock was hammered earlier in the week by the market fall from the collapse of US tech lender Silicon Valley Bank ( SIVB.O ).
CEO Ulrich Koerner moved to calm nerves, saying Credit Suisse’s liquidity base remains strong and exceeds all regulatory requirements.
Koerner said earlier this week that Credit Suisse’s liquidity coverage ratio averaged 150% in the first quarter of this year.
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The Swiss National Bank declined to comment on Credit Suisse’s stock move.
Exane analysts said they see a bailout by the Swiss National Bank and financial regulator Finma, possibly by one or more other banks, as the “most likely scenario” facing Credit Suisse.
Analysts also said that the Saudi National Bank could make a u-turn.
The Saudi National Bank increased its stake in Credit Suisse last year and committed to investing up to 1.5 billion Swiss francs ($1.5 billion).
BROAD-BASED SELL-OFF
Credit Suisse’s stock price plunge has rekindled investors’ concerns about the stability of the global banking system following the collapse of Silicon Valley Bank.
“The selling of banks today is broad-based which suggests to me that there must be some kind of game-changing decisive action to reverse and stabilize the situation,” Exane analysts said in their note.
Ralph Hamers, CEO of Swiss rival UBS ( UBSG.S ), speaking at a Morgan Stanley conference on Wednesday, said UBS had benefited from the recent market turmoil and had seen an inflow of money.
“The last couple of days as you would expect we’ve seen inflows,” Hamers said. “It’s clearly a flight to safety from that perspective, but I think three days doesn’t make a trend.”
Credit Suisse on Tuesday published its annual report for 2022, saying the bank had identified “material weaknesses” in its financial reporting controls and had not prevented customer outflows.
Switzerland’s second-largest bank is seeking to recover from a series of scandals that have damaged the confidence of investors and clients. Customer outflows in the fourth quarter rose to more than 110 billion Swiss francs ($120 billion).
Shares fell below 2 Swiss francs for the first time in Zurich as they headed for a seventh consecutive daily decline.
The cost of insuring the company’s bonds against default has increased. Credit Suisse’s five-year debt default swap widened 574 basis points from 549 bps at the last close, according to data from S&P Global Market Intelligence, marking a new record high. .
($1 = 0.9173 Swiss francs)
Reporting by Noele Illien, writing by Sinead Cruise; Editing by Amanda Cooper, Elisa Martinuzzi, Tomasz Janowski and Jane Merriman
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