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ZURICH: Credit Suisse lost almost a quarter of its value on Wednesday, falling to a new record low after its biggest investor said it could not provide more financial support to the Swiss bank.
“We can’t, because we would go above 10%. It is a regulatory issue,” Saudi National Bank chairman Ammar Al Khudaary said on Wednesday.
The Saudi lender acquired a nearly 10% stake last year after participating in Credit Suisse’s capital raising and committing to invest up to 1.5 billion Swiss francs ($1.5 billion).
Broader equity markets fell sharply, reversing earlier gains, as a drop of as much as 24% in Credit Suisse reignited some of the jitters among investors about the resilience of the global banking system after the collapse of Silicon Valley Bank.
Speaking at a Morgan Stanley conference on Wednesday, Ralph Hamers, chief executive of Swiss rival UBS, said the lender had benefited from the recent market turmoil and seen cash inflows.
Credit Suisse highlights ‘material weaknesses’ in financial reporting
“In the last few days as you would expect we have seen inflows,” Hamers said. “It’s obviously a flight to safety from that point of view, but I think three days doesn’t make a trend.”
Credit Suisse published its annual report for 2022 on Tuesday saying the bank had identified “material weaknesses” in controls over financial reporting and that they had not yet stopped customer outflows.
Switzerland’s second largest bank is trying to recover from a series of scandals that have undermined investor and client confidence. Customer outflow rose in the fourth quarter to more than 110 billion Swiss francs ($120 billion).
The shares fell below the 2-Swiss-franc mark 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 was shot up. Five-year credit default swaps on Credit Suisse debt widened to 574 basis points from the close by 549 bps, according to data from S&P Global Market Intelligence, marking a new record high.
Earlier this week, Credit Suisse CEO Ulrich Koerner told a conference that the bank’s liquidity coverage ratio averaged 150% in the first quarter of this year – well above regulatory requirements.
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