Credit Suisse has shot itself in the foot – and wounded the global banking system
C redit Suisse’s ability to shoot itself in the foot is legendary but you would have thought its shareholders would have learned not to make matters worse. But no, the chairman of Saudi National Bank, which bought a 9.9% stake in the Swiss bank only last year, picked a terrible moment to say his firm would “absolutely not” be investing more.
To be fair, Ammar al-Khudairy gave an explanation (going over 10% would mean extra regulatory rules) and also said he didn’t think Credit Suisse needed extra capital because its financial ratios are “fine”. Too late: the market heard the “absolutely not” comment and wondered where beleaguered Credit Suisse would turn if, in fact, more capital is required.
Remember, it was only on Tuesday that the bank had to confess to “material weaknesses” in its internal controls after a prod from regulators in the US. Last year’s loss of 7.3bn Swiss francs (£6.6bn) was a record and deposit outflows have continued. A three-year turnaround plan under chief executive Ulrich Körner – the latest of many attempts to draw a line under years of scandal (Greensill, Archegos, “tuna bonds” for Mozambique) and risk-management failures – is in its infancy.
Cue a plunge in the share price, as severe as 30% at one point on Wednesday, to an all-time low, a level that is either ridiculously cheap or a prelude to full-blown crisis. The former pride of Swiss banking, an institution founded 1856, was valued at a mere 7bn Swiss francs at its lowest point. By way of irrelevant comparison, the national chocolate champion, Nestlé, is worth almost 300bn Swiss francs.
For “don’t panic” optimists, this is just a case of jittery investors unfairly playing games of whack-a-mole after the collapse of Silicon Valley Bank in the US
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