Credit Suisse collapses on the stock market, is there a fire in the lake?

(Boursier.com) – The Financial Times reported Sunday that the leaders of the Swiss credit he had spent the weekend reassuring investors of his financial health. This follows the move by the bank’s credit default swaps offering protection against corporate default, which rose sharply on Friday to their highest level in at least 10 years. Credit Suisse stock plunged a further 8% to 3.62 Swiss francs this morning. It’s down 27% in one month and nearly 60% since the beginning of the year.

The Zurich banking group is therefore in turmoil. The well-informed FT says the plant’s senior executives would then contact important customers following CDS’s strong progression suggesting growing concerns about the group’s financial health. It was therefore a question of promptly reassuring customers on the bank’s liquidity situation and capital position. “The teams actively engaged with our major clients and counterparties over the weekend,” said an executive quoted by the Financial Times and involved in the discussions. “We also get calls from our major investors with messages of support.”

The FT-listed executive, however, denied recent reports that Credit Suisse had formally contacted investors about a potential fundraiser, insisting that the bank was trying to avoid such a move, with a share price already. at historic lows and an increase in financial costs due to downgrades by rating agencies.

After the title fall last month, CEO Ulrich Körner sent an internal message at group level on Friday to reassure teams already about Credit Suisse’s financial situation, the FT adds. CDS, a measure of investor sentiment on risk, have meanwhile jumped more than 50 basis points in the previous two weeks, hitting 250 basis points on Friday.

The Financial Times also cites a note on topics to discuss with clients, sent Sunday to Credit Suisse executives, following rumors circulating on social networks about the health of the establishment. “Credit Suisse has a strong capital and liquidity position,” the bank said in the note, adding that “the trend in the share price does not change that fact.”

An executive of a company contacted by Credit Suisse, quoted by the FT, said for his part that his view was that the Swiss establishment was “the worst big bank in Europe”, but it was not in immediate danger. “I don’t think it’s a crisis,” added the leader, who believes that the drop in prices reflects the bank’s deep difficulties and the absence of an obvious solution.

Körner and the bank’s board of directors, chaired by Axel Lehmann, are expected to present a corporate reorganization plan on October 27 to address investor concerns, on the sidelines of the third quarter results release. Deutsche Bank analysts estimated that the restructuring would have affected Credit Suisse’s capital position for 4 billion Swiss francs. An FT source, a senior bank executive involved in the presentation, implied that CS would sell business and divest to finance this “very strong pivot” to be achieved with the goal of returning to a stable business.

JP Morgan, for its part, says that given the bank’s financial data at the end of the second quarter, capital and liquidity would be “healthy”. The bank had indicated its short-term intention to maintain its CET1 capital ratio at 13-14%. The end-of-Q2 ratio was well within this range and the liquidity coverage ratio was above requirements. At the end of the first half of the year, Credit Suisse also had assets of 727 billion Swiss francs, or approximately 750 billion euros.

Körner, who previously headed CS’s asset management arm, was named CEO over the summer to reverse investment banking operations and cut costs. The FT estimates that these actions are expected to result in thousands of job cuts. Finally, the board’s latest plan would be to split the investment bank into three and recreate a “bad bank” for high-risk assets and units that are destined to go out of scope.

In any case, we understand that the bank will experience a particularly turbulent month of October, at least until the official presentation of its plans. Meanwhile, Körner would advise his teams to “remain disciplined and closer than ever to customers and colleagues”.

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