Credit Suisse stocks hit new low: Unease spreads to European stocks, Dow futures dive 400 points

Embattled Credit Suisse shares hit an all-time low on Wednesday for the second consecutive day, after it tumbled more than 24 per cent as investors continued to worry about stresses within the banking sector following the sudden collapse of Silicon Valley Bank (SVB) last week. 

The fall was triggered, which further gripped European and US markets on March 15, after Credit Suisse’s largest investor Saudi National Bank (SNB) said today that it could not provide the Swiss bank with more financial assistance.  

The Saudi National Bank has a 9.9 per cent stake in Credit Suisse, which it bought last year as part of the Swiss bank’s $4.2 billion capital raise to fund a massive strategic overhaul aimed at improving investment banking performance in a bid to address risk and compliance failures. 

“We cannot because we would go above 10 per cent. It’s a regulatory issue,” Saudi National Bank Chairman Ammar Al Khudairy told Reuters on Wednesday.  

However, he added that the SNB is happy with Credit Suisse’s transformation plan and suggested the bank was unlikely to need extra money. 

Trading in the bank’s plummeting shares was halted several times throughout the morning. The stock recovered slightly by around midday London time but was still down around 26 per cent at 12.20 PM BST.  

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Rout in European, US markets 

European markets were sharply lower on Wednesday, where banking stocks were in deep negative territory. The pan-European Stoxx 600 index was down 2.29 per cent, with most sectors trading in the red. 

Banking stocks were down 6.4 per cent, followed by retail, which was down 4.7 per cent. 

BNP Paribas was down 10.7 per cent, Societe Generale was down 11.9 per cent, Commerzbank was down 8.9 per cent and Deutsche Bank was down 7.8 per cent. 

Dow futures fell 1.7 per cent or over 400 points, S&P 500 futures slipped 1.8 per cent, and Nasdaq 100 futures were down 1.6 per cent. 

Shares of large US banks were under pressure in premarket trading, CNBC said on Wednesday.  

Shares of Wells Fargo and Citi fell about 4 per cent each, while Bank of America dipped 3 per cent. JP Morgan and Goldman Sachs shed about 2 per cent. 

Crisis in Credit Suisse 

On 14 March, Zurich-based Credit Suisse said in its 2022 annual report the bank has identified "material weaknesses" in internal controls over financial reporting and not yet stemmed customer outflows.  

On Tuesday, 14 March, while announcing its 2022 annual report, Credit Suisse said that the bank has identified "material weaknesses" in internal controls over financial reporting and has not yet stemmed customer outflows. Customer outflows in the fourth quarter rose to more than 110 billion Swiss francs ($120 billion). 

Credit Suisse has a domestic Swiss bank plus wealth management, investment banking, and asset management operations. 

The bank has been struggling with a string of scandals that have undermined the confidence of investors and clients. The bank has changed its top leadership multiple times since 2019, with the most recent changes coming in July 2022, with the group getting a new CEO. 

The crisis in Credit Suisse started in 2019, when Chief Operating Officer Pierre-Olivier Bouée was discovered to have hired private investigators to spy on high-level employees and was fired shortly after. 

In 2021, Credit Suisse announced that it was closing and liquidating several investor funds, worth $10 billion, in the meltdown of US hedge fund Archegos Capital. Due to this meltdown, Credit Suisse lost $4.7 billion. Credit Suisse provided brokerage services to Archegos Capital, and faced criticism for its role. It fired at least seven executives in the aftermath. Its investment in financial services company, Greensill Capital, also resulted in losses after Greensill declared insolvency in March that year. Investors reportedly lost close to $3 billion because of this.
A year later, a massive leak of over 30,000 of Credit Suisse's clients revealed over $100 billion in wealth held by people who had profited from "torture, drug trafficking, money laundering, corruption and other serious crimes," a report in The Guardian said. 

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