The share price of the Credit Suisse bank rose sharply on Thursday as the stock market opened, after obtaining the support of the Swiss central bank to reassure the markets after the worst session in its history.
In early trading, the bank’s stock gained 30.82% on the Zurich stock exchange, to 2.22 Swiss francs, after hitting an all-time low of 1.55 francs on Wednesday as the share closed out the day with a drop of 24.24%.
Credit Suisse announced it early Thursday morning European time it will borrow up to 50 billion Swiss francs ($53.7 billion) from the central bank.
At the same time, the bank announced in a press release a series of debt buyback operations for around 3 billion Swiss francs.
“These steps are a decisive move to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders,” the bank’s chief executive officer, Ulrich Koerner, said in the statement.
After a surprising silence since the start of the week, the Swiss central bank and Swiss financial supervisor finally came to CS’s defense on Wednesday.
“Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks,” the Swiss National Bank (SNB, Central) and the Financial Market Supervisory Authority (FINMA) said in a joint statement.
“If necessary, the SNB will make liquidity available to Credit Suisse,” the institutions added.
Credit Suisse’s collapse comes after Californian bank Silicon Valley Bank (SVB) collapsed amid a wave of massive withdrawals from its customers that made it hard for the establishment to strike out on its own.
“It seems more and more investors are viewing CS as the next most likely domino” to fall, said Finalto analyst Neil Wilson.
But if Credit Suisse faces “existential problems,” in his view it’s a different kind of trouble for the banking sector. “It’s really too big to go bankrupt,” he said.
Unlike SVB, the Swiss establishment is one of thirty international banks deemed too big to fail, which also imposes tougher rules to withstand major shocks.
The concern extends beyond Switzerland, with the US Treasury saying it is “monitoring the situation and is in contact with international counterparts”.
The announcements from Switzerland had an effect on the main European stock markets, which opened this Thursday with day-over-day gains with losses ranging between 3 and 4%.
In the early stages, Paris rose by 1.49%, Frankfurt by 1.52%, London by 1.40%, Madrid by 1.98% and Milan by 1.48%.
Concerns about the effects of the SVB bankruptcy continue to weigh heavily in Asia. Tokyo lost 0.8% at the close, Hong Kong 1.72% and Shanghai 1.12%.
The Swiss bank’s stock slump accelerated on Wednesday after its main shareholder, the Saudi National Bank, refused to increase its stake in the capital.
Asked by Bloomberg TV whether the Saudi bank could invest more money, its chairman, Amar Al Judairy, said: “The answer is absolutely not, for several increasingly simple reasons, which are regulatory and statutory,” he said. .
The Saudis currently own 9.8% of the Swiss bank. “If we go over 10%, a set of new rules come into force,” she explained.
The Saudis became CS’s first shareholders during a capital raise launched in November to finance a major restructuring of the entity.
The bank has been in trouble for two years after the bankruptcy of the British financial firm Greensill, which marked the beginning of a series of scandals that have weakened the bank.
Some shareholders ended up throwing in the towel, such as the US investment firm Harris Associates, one of its most important backers, which revealed last week that it had sold all of its stake.
Source: Clarin
Mary Ortiz is a seasoned journalist with a passion for world events. As a writer for News Rebeat, she brings a fresh perspective to the latest global happenings and provides in-depth coverage that offers a deeper understanding of the world around us.