Shares of Swiss banking giant Credit Suisse fell to a new all-time low on Monday after the company warned last week it could face a $1 billion drop in earnings this quarter amid a worrying liquidity crisis.
Credit Suisse shares fell as much as 5% on the New York Stock Exchange Monday morning to a record low of $3.41 — dragging shares of Switzerland’s second-largest bank down more than 65% this year; over the same period, the Dow Jones US Banks Index fell 14%.
The defeat comes after the bank released a dismal fourth-quarter earnings update and warned last week that it expected a loss of up to $1.6 billion (1.5 billion Swiss francs) as customers continued to run out of money paid out by the bank, while wealth management assets are down 10% since the end of the last quarter and total assets are down 6%.
The announcement further fueled investor fears that the outflows will result in a sharp drop in liquidity, which has fallen below some regulatory requirements, but the bank has tried to alleviate concerns by raising about $5 billion through two bond sales earlier this month raised US dollars.
“In short, Credit Suisse is beginning to behave like a bank on the brink of collapse,” Sevens Report analyst Tom Essaye said in a recent note, citing the bank’s recent downgrades by rating agencies Fitch and Standard & Poor’s as further signs of the company’s “financial deterioration”.
In a weekend interview, the head of the bank’s Swiss unit, Andre Helfenstein, said some customers had withdrawn money but “very few actually closed their accounts,” although he lamented that staff were suffering from “a certain level of fatigue and sometimes frustration.” ‘ would have suffered,’ amid the bank’s suffering performance.
“Put simply, Credit Suisse has had a litany of scandals and trading losses over the past few years that have caught up with everyone,” says Essaye, pointing out that the bank has been at the epicenter of two of the biggest sudden financial company collapses in recent years . Credit Suisse suffered a $10 billion loss after the bankruptcy of fund partner Greensill Capital last year and lost another $5.5 billion after the collapse of hedge fund Archegos Capital.
Amid last year’s turmoil, Credit Suisse, which has posted profits of more than $1 billion in previous quarters, has posted four straight quarters of losses. To contain costs, the bank, which employs more than 50,000 people, announced late last month that it would cut about 9,000 jobs by the end of 2025, and the company replaced its CEO in July. In an email last month, new boss Ulrich Körner urged employees not to confuse the company’s “daily share price performance with the bank’s strong capital base and liquidity position.” $1.5 trillion in assets.
In 2009, Credit Suisse had a market value of over US$78 billion. It’s now worth less than $9 billion.
Credit Suisse Stocks Sink as Capital Worries Trigger Memories of Lehman Brothers Collapse: Here’s What We Know (Forbes)
Burnt by the Archegos and Greensill scandals, Credit Suisse shifts focus to wealth management in overhaul (Forbes)