Credit Suisse sheds another 12% as traders digest emergency liquidity

Credit Suisse shares fell 12% on Friday, after soaring over the previous session as the embattled lender said it will borrow up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank.

This week’s intervention by Swiss authorities, which also reaffirmed that Credit Suisse met the capital and liquidity requirements imposed on “systemically important banks,” prompted shares to jump more than 18% on Thursday after closing at an all-time low on Wednesday. Credit Suisse also offered to buy back around 3 billion francs’ worth of debt, relating to 10 U.S. dollar-denominated senior debt securities and four euro-denominated senior debt securities.

The slide to Wednesday’s low came after top investor the Saudi National Bank revealed it would not provide the bank with any more cash due to regulatory requirements, compounding a downward spiral in Credit Suisse’s share price that began with the delay of its annual results over financial reporting concerns.

The bank is undergoing a massive strategic overhaul aimed at restoring stability and profitability after a litany of losses and scandals. The restructure involves the spin-off of the investment bank to form U.S.-based CS First Boston, a steep reduction in exposure to risk-weighted assets, and a $4.2 billion capital raise funded in part by the 9.9% stake acquired by the Saudi National Bank.

However, capital markets and stakeholders appear unconvinced. The share price has fallen sharply over the last year and Credit Suisse has seen huge outflows in assets under management, losing around 38% of its deposits in the fourth quarter of 2022. Credit default swaps, which insure bondholders against a company defaulting, soared to new record highs this week.

According to the CDS rate, the bank’s default risk has surged to crisis levels, with the 1-year CDS rate jumping by almost 33 percentage points to 38.4% on Wednesday, before finishing Thursday at 34.2%.

Charles-Henry Monchau, chief investment officer at Syz Bank, said Credit Suisse needs to go further to restore investor confidence.

“This support from the SNB and the statement from regulators indicate that Credit Suisse in its current form will continue,” he said in a note Thursday.

“However, these measures are not sufficient for Credit Suisse to be completely out of trouble; it is about restoring market confidence through the complete exit of the investment bank, a full guarantee on all deposits by the SNB, and an injection of equity capital to give Credit Suisse time to restructure.”