Following the publication of the 2022 annual report by Credit Suisse (Schweiz) that noted the lack of an “effective risk assessment process to identify and analyze the risk of material misstatements in its financial statements” on 14 March, a fall in stock prices that saw Credit Suisse shares trade as low as CHF 1.56 (€1.60) before inching back up on 15 March, Credit Suisse on 16 March announced its intention to borrow up to CHF 50bn (roughly €51bn) from the Swiss National Bank under a covered loan facility, as well as a short-term liquidity facility.
“This additional liquidity would support Credit Suisse’s core businesses and clients as Credit Suisse takes the necessary steps to create a simpler and more focused bank built around client needs,” stated the press release.
Plans to buy back debt
Credit Suisse also announced that it is making a cash tender offer for USD denominated senior debt securities for an aggregate consideration of up to $2.5bn, as well as a separate offer for euro dominated debt securities for an aggregate consideration of up to €500m. These transactions will allow Credit Suisse to “repurchase debt at attractive prices.”
“These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders,” CEO Ulrich Koerner said. “We thank the SNB and [Swiss financial market supervisory authority] Finma as we execute our strategic transformation. My team and I are resolved to move forward rapidly to deliver a simpler and more focused bank built around client needs.”
The situation with Credit Suisse is of a “very different nature” than that of Silicon Valley Bank in California, which collapsed on 10 March 2023, said Chris Turner, global head of markets and regional head of research for UK & CEE at ING Think, in an article published 16 March. “The trigger for yesterday’s CS sell-off was a remark from one of its top investors over capital injections,” while “SVB’s problems crystallised last week when it struggled to raise capital.”
“The SNB has made it clear that it believes Credit Suisse is appropriately capitalised for a G-SIB [globally systemically important bank],” said Turner. “The question now is whether investors will be happier that CS has access to liquidity or will continue to focus on the CS business model and the trend in capital levels.”
Panic “completely unwarranted”
Saudi National Bank chair Ammar Alkhudairy stated on 15 March on Bloomberg TV that the Saudi National Bank would not be offering additional capital for regulation reasons. If their stake were to go above the 10% threshold, new regulations would apply, he added. The Saudi National Bank held 395.5m shares, or 9.88% of the voting rights, of the registered Group shares, according to the 2022 annual report of Credit Suisse (Schweiz).
In a separate interview with 16 March with CNBC’s Capital Connection, Alkhudairy said, “It’s panic, a little bit of panic. I believe completely unwarranted, whether it be for Credit Suisse or for the entire market.” Moreover, “There has been no discussions with Credit Suisse about providing assistance,” he said. “I don’t know where the word ‘assistance’ came from, there has been no discussions whatsoever since October.”
In one year, the share price of Credit Suisse’s stock has dropped over 75%. On 16 March 2022, shares were priced at CHF 7.14 (€7.27), and on 15 March 2023, shares traded as low as CHF 1.56 (€1.60).