By Steve Goldstein
Swiss banking giant Credit Suisse saw its shares fall to a new record low on Wednesday, weighing on the broader market and the rest of the European banking sector days after two lenders collapsed in the US
Credit Suisse ( CSGN.EB ) shares fell as much as 23%, breaking below the 2 franc level and extending declines that have seen shares fall 75% over the past 52 weeks.
The fresh losses came after the chairman of the bank’s top shareholder, Saudi National Bank, ruled out investing more in the bank in a Bloomberg interview on Wednesday.
On Tuesday, Credit Suisse said in its annual report that it had significant weaknesses in its financial controls. Credit Suisse has lost money for five consecutive quarters, and in the fourth quarter its wealthy clients withdrew about $100 billion from the bank.
The Euro Stoxx banking index fell 7%, and the shares of major French banks Societe Generale and BNP Paribas each fell 10%.
“There are a number of concerns here; first, traders are worried about whether Credit Suisse will be able to survive given that the stock has fallen below the two-hand level today, and if it doesn’t, how big the crisis is going to be. Secondly, the issue of monetary policy tightening has worried traders in Europe as well, while many still believe that [European Central Bank] is going to do what it does best, which is chase the curve,” said Naeem Aslam, chief investment officer at Zaye Capital Markets.
The ECB meets on Thursday and is expected to raise interest rates by half a point
The struggles for Europe’s banks dragged on broader market sentiment, with S&P 500 futures recently down around 2%.
Credit Suisse, which had 1.29 trillion francs ($1.4 billion) in assets under management in the fourth quarter, lost 7.29 billion francs last year.
The Swiss financial regulator says Credit Suisse has both a recovery plan and a Swiss emergency plan, but it said preparatory measures for the institution’s resolvability were “not yet sufficient”. Credit Suisse, and rival UBS ( UBS ), would convert bonds into equity through a so-called bail-in process if necessary.
-Steve Goldstein
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03-15-23 0718ET
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