Connect with us

Hi, what are you looking for?

World News

Credit Suisse reeling as fears for future mount: German rival Deutsche Bank also in the spotlight

Credit Suisse, which dates back to 1856 but has seen its reputation tarnished in recent years by a series of scandals, saw its stock plunge 11.5% in early trading yesterday.

Shares of Credit Suisse slumped to a record high after executives’ attempts to reassure investors about its financial health backfired.

The struggling Zurich-based lender, which dates back to 1856 but has seen its reputation tarnished in recent years by a series of scandals, saw its stock fall 11.5% in early trading yesterday.

The shares then rallied but remain down 55% this year amid growing fears over its finances.

Credit Suisse, which dates back to 1856 but has seen its reputation tarnished in recent years by a series of scandals, saw its stock plunge 11.5% in early trading yesterday.

Credit Suisse, which dates back to 1856 but has seen its reputation tarnished in recent years by a series of scandals, saw its stock plunge 11.5% in early trading yesterday.

And the price of its credit default swaps (CDS) – financial instruments bought by investors that effectively act as insurance if a company waives its debts – has soared.

Europe’s financial sector has also been rocked by fears over the future of German rival Deutsche Bank, which was forced to shell out £23million last month to settle a lawsuit linked to its dealings with pedophile Jeffrey Epstein and several Russian oligarchs.

With financial markets in a feverish mood, senior Credit Suisse executives spent the weekend calling its biggest clients and investors to calm their nerves.

And – as reported in The Mail on Sunday – chief executive Ulrich Koerner has sent a note to staff in a bid to reassure them of the bank’s financial stability.

However, he also warned that Credit Suisse was at a “critical juncture” as it put in place a restructuring program due to be announced on October 27.

Swiss regulator Finma and the Bank of England are monitoring the situation.

Speculation has swirled that Switzerland’s second-biggest bank, which employs more than 5,000 people in the UK, will need to raise up to £3.7billion to pay for a drastic restructuring plan.

But the share price fell as investors worried about where the money was coming from.

If Credit Suisse offers them more cash, their current holdings will be significantly diluted.

And the CDS debacle shows that investors likely to lend to the bank through bonds are already worried about its ability to repay.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: “The market is aggressively pricing a default for one of Switzerland’s largest banks.

‘Is it possible? Yes, it’s possible, but it’s highly unlikely because Credit Suisse is definitely too big to fail.

“What will probably happen is that either there is a miracle this Christmas and the new chief executive of the bank strengthens the back of the bank in 100 days as he promised, and the bank survives and thrives until to the next scandal.

Either the bank will become a nice takeover target and be eaten up by another bank, or it will be saved by the Swiss government.

A briefing note prepared for Credit Suisse executives as they circled investors over the weekend said: “A matter of concern to many stakeholders, including media speculation, continues to be our capitalization and our financial strength. Our position on this is clear.

“Credit Suisse has a strong capital and liquidity position and balance sheet. The evolution of stock prices does not change this fact.

Other experts noted that there was no imminent danger. JP Morgan analysts said Credit Suisse’s capital position, or the amount of cash it freed up for disasters, was “sound”.

But concerns remain about how Koerner, appointed in July, and Chairman Axel Lehmann will afford their reshuffle. Koerner’s strategy is to sell parts of Credit Suisse, including chunks of its struggling investment bank, to raise cash.

But it’s unclear whether the lender will be able to get a good price for these assets under current market conditions.

In addition, damage to Credit Suisse’s reputation could lead to the departure of some clients. Credit Suisse found itself in this position due to a series of governance and risk failures that led to it being embroiled in a series of deadly scandals.

The first was the 2019 corporate espionage debacle, where a senior Credit Suisse banker paid private investigators to track a former employee.

A few months later, then-president Urs Rohner found himself embroiled in a racist row on his 60th birthday.

Held in a restaurant in Zurich, it featured a black performer dressed as a cleaner who sang while sweeping the floor.

Then came the collapse of Greensill Capital, whose Credit Suisse products had invested clients’ money.

Soon after, hedge fund Archegos – to which Credit Suisse had lent heavily – imploded.

Antonio Horta-Osorio, the former Lloyds Bank boss, was ousted as chairman in January when it emerged he broke Covid rules to attend the Euro football final and to the Wimbledon tennis final in 2021.

And chief executive Thomas Gottstein stepped down over the summer as Credit Suisse reported a series of “disappointing” second-quarter results.

Some links in this article may be affiliate links. If you click on it, we may earn a small commission. This helps us fund This Is Money and keep it free to use. We do not write articles to promote products. We do not allow any business relationship to affect our editorial independence.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like

Health

It’s fun to be a student, especially if you’re motivated to achieve. However, it’s getting harder for students to focus in today’s busy society....

Business

When you apply for a personal loan, lenders first determine your credit score to know how credible and reliable you are. This means that...

Finance

Loans against property are a common option for people needing high-value cash. Given that its interest rates are almost 3% to 4% more than...

Business

Zion Market Research has released a new report that projects the Endotracheal Tube Securement Devices Market: Global Industry Perspective, Comprehensive Analysis and Forecast, 2018-2025. The year...