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Credit Suisse, one of the largest banks in the world and second only to UBS in Switzerland, is at a “critical moment”. This was stated in a note by Credit Suisse CEO Ulrich Koerner, as reported by the financial portal TheStreet.
“I am aware that there are many uncertainties and speculations both inside and outside the bank,” said Koerner. According to the executive of the Swiss giant, this is a “critical moment” for the bank and rumors and speculations will increase. .
Over the summer, Credit Suisse president Axel Lehmann appointed Körner as chief executive with a mandate to overhaul the bank, which in recent years has suffered a corporate espionage scandal, investment fund closures, record business losses and a series of lawsuits.
These scandals have reignited speculation that Credit Suisse will go bankrupt or merge with rival UBS. According to Business Insider, Credit Suisse had a market capitalization of $ 22.3 billion a year ago, while it now has a market value of $ 10.4 billion.
The scandals
In 2021, several scandals practically followed one another without interruption, causing multi-billion dollar losses to the bank and compromising Credit Suisse’s reputation. The first is linked to the bankruptcy of the British company Greensill, founded in 2011 and specializing in lending to businesses and converting their debts into financial securities that it resold to investors.
However, the latter, including Credit Suisse, began to doubt the real values of the debts and eventually abandoned Greensill, which filed for bankruptcy in March 2021. Up to that point, the Swiss bank had invested $ 10 billion. of its customers in the products of the British company.
The second scandal broke out in the spring of 2021 and involved Archegos Capital Management. Its founder, Bill Hwang, is a South Korean investor based in New York, whose Tiger Asia company later became Archegos after being accused of insider trading in 2012. Eventually Hwang convinced banks, including Credit Suisse, to lend him $ 30 billion for investments. However, in March 2021, Archegos’ operations were no longer successful and in the end Hwang’s company also went bankrupt, failing to cover the losses generated for the banks.
To recover from scandals and record losses, Credit Suisse has decided to resort to a radical reorganization. The bank’s board of directors also allowed the sale of profitable divisions. Over the weekend, Credit Suisse management reached out to major clients and counterparties to reassure them of the Swiss lender’s financial stability, the Financial Times reported. Furthermore, according to Reuters, the bank has officially contacted investors regarding a possible additional capitalization (one of the leaders of Credit Suisse later denied this information to the FT). Against the backdrop of this news, the bank’s shares fell 11.52% on October 3, to 3.518 Swiss francs ($ 3.56) and hit an all-time low.
“As far as Credit Suisse is concerned, the shares of the second largest Swiss financial conglomerate have fallen close to their 2008 lows,” said Berlin journalist Vitali Smantser. He then added that this is a “sad sign” for the European and global economy.
The problems of Deutsche Bank
Credit Suisse isn’t the only bank in dire straits. According to Smantser, the restructuring of Deutsche Bank has already begun, given the all-time lows hit by its shares.
“First of all, the news about the collapse of Deutsche Bank’s shares is related to the Nord Stream incident,” Smantser told the BFM portal. According to the reporter, the damage to the pipelines caused “panic in European stock exchanges and, in the first place, this obviously affected the German economy and the shares of Deutsche Bank, the largest financial conglomerate” in Germany.
On the other hand, the reporter also pointed out that Deutsche Bank started losing customers due to the inconveniences that occurred in its services. These include, for example, the reduction in the number of ATMs, which forces Deutsche Bank card users to withdraw cash from other banks and, consequently, to pay commissions.
However, the expert sees no reason for “panic”, as it is very likely that the German or EU authorities will intervene to “try to correct the situation”. “In other words, as during the 2008 financial crisis, we must expect that, most likely, Scholz’s federal government will provide an additional, very substantial package of measures to, if not bail out, keep Deutsche Bank afloat.”
