Credit Suisse shares slide 24% after bank's top shareholder rules out support
3 min read . Updated: 15 Mar 2023, 06:08 PM IST
Premium- ‘We cannot because we would go above 10 per cent. It’s a regulatory issue,’ Saudi National Bank Chairman Ammar Al Khudairy was quoted as saying by Reuters
Credit Suisse Group AG shares plunged 24 per cent on Wednesday, the biggest one-day selloff on record after the lender's biggest shareholder, Saudi National Bank, said it could not raise its 10 per cent stake citing regulatory issues.
“We cannot because we would go above 10 per cent. It’s a regulatory issue," Saudi National Bank Chairman Ammar Al Khudairy was quoted as saying by Reuters. However, Khudairy further said that the SNB is happy with Credit Suisse’s transformation plan and suggested the bank was unlikely to need extra money.
Saudi National Bank, which is 37 per cent owned by the kingdom’s sovereign wealth fund, became Credit Suisse’s biggest shareholder late last year after acquiring a 9.9 per cent stake in the Swiss lender for 1.4 billion francs. The stake has lost more than 500 million francs in a matter of months.
Trading halted
Trading in Credit Suisse's plummeting shares was halted several times by the stock exchange operator as volumes soared and the stock plummeted. The stock recovered slightly by around midday London time and were last down 20.2 per cent for the session.
"The Credit Suisse share price is falling and government bonds are rallying on the back of that. Still very much driven by the perceived health of the banking sector, but this time in Europe," said Antoine Bouvet, senior rates strategist at ING.
Credit Suisse is in the midst of a complex three-year restructuring in a bid to return the bank to profitability. It was hard hit by the recent wave of bearishness triggered by Silicon Valley Bank’s demise, with its five-year CDS spreads hitting a record. Investors are increasingly worried about the health of banks following the collapse of Silicon Valley Bank.
European bank stocks fell
Europe's bank index has now seen more than 120 billion euros evaporate ($127.08 billion) in since 8 March. The index was last down 6.4 per cent at 1154 GMT. This dragged lower European shares 2.4 per cent. It is the index's biggest week-on-week loss since Russia's invasion of Ukraine last February.
Markets are "spooked" by Credit Suisse headlines, said Richard McGuire, head of rates strategy at Rabobank in London.
“Markets are very sensitive to the negative news flow after the surprise of seeing a US bank disappear from one day to the other and the contagion that hit other US regional banks," said Francois Lavier, head of financial debt strategies at Lazard Freres Gestion.
“In a context where market sentiment is already weakened, not much is needed to weaken it even further," Lavier added.
Fears of contagion after the collapse of tech-focused lender SVB and New York-based Signature Bank last week have weighed on European bank stocks.
"Markets are wild. We move from the problems of American banks to those of European banks, first of all Credit Suisse," said Carlo Franchini, head of institutional clients at Banca Ifigest in Milan.
"This is dragging lower the whole banking sector in Europe. The shares accelerated losses after the Saudis (commented) ...I believe Credit Suisse's crisis can be solved and the bank will not be let to go belly up," Franchini said.
Shares in Swiss bank UBS fell 6.8 per cent. French banks BNP Paribas and Societe Generale were both down by over 11 per cent.
Spanish bank Banco de Sabadell was last down 9 per cent and Germany's Commerzbank fell nearly 10%, while Deutsche Bank shares were down 8.4%.
"The fact remains still that European banks, and especially the bigger ones, have a much better management of their interest rate risk, which is what made the three US banks collapse, and they have liquidity," said Jerome Legras, head of research at Axiom Alternative Investments.
