Credit Suisse sinks on the stock market amid fears of a banking crisis

Despite the attempts by the president of Credit Suisse to reassure investors in a feverish market in the face of instability in the banking sector, it was not enough to contain the fall in the institution's shares on the stock exchange.

Axel Lehmann ruled out that the bank needs government help: “It's not a topic,” he said, during a banking sector conference in Saudi Arabia. “We have solid financial ratios, a solid balance sheet,” he insisted.

Governments try to calm markets, but the situation is still fragile

The measures taken by North American authorities, following the bankruptcy of the Californian bank Silicon Valley Bank (SVB), and the guarantees from European governments about the solidity of banking systems managed to stabilize the markets a little on Tuesday (14), but the The situation continues to be considered fragile.

Shaken by several scandals, Credit Suisse recorded a net loss of almost 7,3 billion Swiss francs ($7,917 billion) in 2022. This was the worst result for a Swiss bank since the 2008 financial crisis, when the institution recorded loss exceeding 8 billion francs.

“It appears that more and more investors are looking at CS (Credit Suisse) as the next most likely domino to fall,” said Finalto analyst Neil Wilson. But “it really is too big to fail,” he added.

And why is Credit Suisse's situation more worrying?

Because, unlike the SVB, the Swiss chunk is one of the 30 international banks considered “too big” to go bankrupt! So there are stricter rules so that it doesn't break.

The collapse of the Swiss bank's shares accelerated after the main shareholder, the Saudi National Bank, refused to increase its stake in the institution's capital.

The Saudis currently own 9,8% of the Swiss bank. “If we exceed 10%, a series of new rules come into force”, claimed Amar Al Judairy, president of the Saudi institution.

When did the Credit Suisse crisis start?

The bank has been in trouble for two years following the collapse of British financial firm Greensill, which marked the start of a series of scandals that weakened the bank. Since March 2021, the stock has lost more than 83% of its value.

Some shareholders ended up throwing in the towel, such as the American investment company Harris Associates, one of its most important supporters and which revealed, last week, that it had sold its entire stake.

“The pressure on Credit Suisse comes, in an already very nervous market,” Jane Foley, an analyst at Rabobank, told AFP.

(Source: AFP)

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