More banking problems? Credit Suisse plunges 30% as largest shareholder withdraws support

More banking problems? Credit Suisse plunges 30% as largest shareholder withdraws support

Credit Suisse shares fell to another all-time low of just CHF 1.65 ($1.79) on Wednesday after its largest shareholder - Saudi National Bank (SNB) - announced it would not be able to buy any more shares in the company.

The 30% drop came amid widespread fears that Credit Suisse could be on the verge of default.

Another bank run?

The Saudi National Bank is no longer allowed to invest in the troubled bank due to regulatory restrictions, SNB Chairman Ammar Al Khudairy told Reuters on Wednesday. It currently holds a9.88% sharein the company, just 12 basis points below the 10% ownership limit.

The news only adds to widespread industry fears that have pushed bank stocks lower this week following the collapse of Silicon Valley Bank (SVB) last Friday. According to American bank stockssufferedOn Monday, several European banks faced declines on Wednesday, including France's Societe Generale (-11%) and Germany'sCommerzbank(-8.5%).

Credit Suisse has been plagued by regulatory compliance issues since last yearMistakeand scandals, strategicOverhauls, weak earnings releases and macroeconomic pressures. The bank's five-year credit default swaps began in OctoberTradeto 10-year highs, meaning investors were seeking protection from a possible default.

CDS swaps shot uphit new highs again on Wednesday, with the market pricing in a 47% chance of default for the company.

WTF? The markets are now pricing in a 47% probability of default for Credit Suisse. What did I miss? pic.twitter.com/Q2MMo0T3LV

— Holger Zschaepitz (@Schuldensuehner) March 15, 2023

The bank's shares had already fallen to new lows on Tuesday when Credit Suisse released itsAnnual reportwhich identified “material weaknesses” in its financial reporting and disclosure controls just a month after publicationworst annual losssince the financial crisis of 2008.

Still, the SNB's Al Khudairy told Reuters he was satisfied with Credit Suisse's turnaround plan.

"I don't think they'll need any extra money; if you look at their circumstances, they're fine," he said. “And they operate under a strict regulatory system in Switzerland and other countries.”

In one (ninterviewWith CAN, Credit Suisse CEO Ulrich Körner said on Wednesday the bank has a “very, very strong” capital and liquidity base. SVB's CEO made similar claims last week, urging customers to "remain calm" outside the bank.collapsedThe next day.

The size of Credit Suisse

When discussions about a possible Credit Suisse default began last year, analysts said comparedthe idea of ​​​​a repeat of the Lehman Brothers episodes from 2008.

Greg Foss – 30-year Bitcoin enthusiast and high-yield credit trader, risk manager and analyst –calledthat Credit Suisse is a “systemically important financial institution” and is currently in the midst of collapse.

“There is a run on the bench,” he said in an interview on Tuesday. "The wealth department is losing assets in a great way... I'm not saying they're insolvent, but I've seen enough banks in the situation that are insolvent."

When SVB collapsed last week due to a bank run, the Federal Reserve intervened until Sunday to bail out all of the bank's depositors to stem market contagion. On Wednesday, the Financial Times reported that Credit Suisse was thereattractiveto the Swiss Central Bank for its vocal support in favor of its financial situation.

Custodia Bank CEO Caitlin Long calledthat Credit Suisse is “swamping Switzerland in size” and that the bank will become “the Fed’s problem” if it collapses.

1/ SAD TO SEE what's happening at my old store @Credit Suisse. It also almost went under in 2001 when John Mack took me out of insurance stock analysis to help him restructure in Zurich. Another example of what goes wrong when the balance sheet is undermined☹️ https://t.co/vKE1h0GQtD

— Caitlin Long 🔑⚡️🟠 (@CaitlinLong_) March 14, 2023

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