As a result of worries over the bank’s capacity to reorganise its business and increase its capital following a spate of losses, Credit Suisse shares fell as much as 11.5% on Monday and its bonds touched record lows.
Although there haven’t been any significant recent developments and Credit Suisse’s current issues are well known, the Swiss regulator FINMA plus the Bank of England in London, where the creditor has a significant hub, are closely monitoring the situation, according to a source with knowledge of the matter.
The Swiss finance ministry, FINMA, and the Bank of England all declined to comment.
On Monday, Credit Suisse (CSGN.S), whose market capitalization fell to a new low of Swiss francs 9.73 billion ($9.85 billion), has strong capital and liquidity, according to a statement made last week by Chief Executive Ulrich Koerner to workers.
On October 27, the bank intends to announce its restructuring strategy along with third-quarter profits.
Nevertheless, according to a Sunday Financial Times report, bank executives spent the weekend assuring counterparties, major clients, and investors about their liquidity and capital.
Regarding the FT report, a spokeswoman for Credit Suisse declined to comment.
The FT said that the weekend calls came after a substantial increase in the openings on the bank’s credit-default swaps (CDS), which provide insurance against a company defaulting on its debt.
Adding 105 basis points from Friday’s closing to trade at 355 bps, the highest level in at minimum more than two decades, Credit Suisse CDS rocketed higher once more on Monday.
The bank’s CDS was 57 basis points at the beginning of the year.
International bonds issued by the lender also displayed stress.
Longer-dated bonds saw the biggest drops in the euro-denominated bonds of Credit Suisse, which reached record lows but recovered part of their losses in the afternoon.
The shares, which have lost more than half of their value this year, recovered from early lows to trade down 0.4% at about 3.96 Swiss francs, on 1500 GMT.
According to Credit Suisse, the bank is looking at ways to reduce its investment bank and turn it into a capital-savvy, and advisory-led operation. It is also looking at strategic options for its Securitized Products division.
Last month Credit Suisse was soliciting investors for additional funding as it attempted its turnaround, citing people familiar with the issue.
Its financials as of the end of the second quarter has favourable results. JPMorgan analysts described Credit Suisse’s liquidity and capital as “strong” in a research note published on Monday.
The second-quarter ending ratio is well within that range, and the liquidity coverage ratio is substantially above requirements, the analysts added, given that the bank has stated a near-term objective to preserve its CET1 capital ratio at 13–14%.
At the conclusion of the second quarter, Credit Suisse reported total holdings of 727 billion Swiss francs (about $735.68 billion), of which 159 billion francs were cash and due from banks and 101 billion francs were trading assets, it said.
Analysts at Jefferies claimed that investors are still uncertain about how much capital the bank could need to raise to cover the cost of restructuring.
They added that the bank may now be compelled to sell assets.
Analysts at Deutsche Bank anticipated a capital shortage of at minimum 4 billion francs in August.
Credit Suisse has lost close to 4 billion Swiss francs in only the last three quarters.
The costs of funding for the bank have increased due to uncertainty.
