During the National Day holiday, overseas market turmoil broke out again. Credit Suisse (hereinafter referred to as " Credit Suisse "), a century-old investment bank, was pushed to the forefront of public opinion after the Archegos liquidation incident.
Recently, a report by David Taylor, a reporter from Australian Broadcasting Corporation, about a large investment bank , attracted attention, and multiple sources pointed to Credit Suisse, a well-known European investment bank.
Credit Suisse told First Financial that it would not comment on the incident. Since the quarterly report is about to be released, the institution is currently in the silent period . According to the reporter, except for the revelations from Australian media, other mainstream foreign media have no reports on the relevant news yet.
Previously, Credit Suisse's stock price plummeted, with a cumulative drop of more than 20% in September. As of September 30, it was at US$3.92 per share, hitting a historical low. The company's 5-year credit default swap spread (CDS) continued to soar.
Although the rumors related to Credit Suisse caused the institution's stock price to plunge , and it was even compared to the "Lehman storm", the overall market volatility is still relatively stable.
Investment banker who worked at Wall Street back then also told reporters that when Lehman Brothers was on the verge of bankruptcy in September 2008, everyone knew about this, and people on Wall Street were unwilling to talk about other things. Today, the rumors about Credit Suisse have not caused the overall market to experience the anxiety of the year. This incident is more fermented on social media such as Twitter. For example, the Panic Index VIX (a common indicator used to measure the volatility of the S&P 500 option) and VSTOXX (European VSTOXX Volatility Index) are relatively calm. "Stock investors have not taken any effective action to protect themselves, which is completely different from the situation before the crisis that year." For more than a decade, European and American regulators have adopted extremely strict and strong supervision of the financial system, and the "stress test" is never absent every year, which greatly reduces the possibility of systemic risks.
According to the Wall Street Journal , the Credit Suisse Group AG issued a memorandum to employees last weekend and made a series of calls to investors and customers in an attempt to alleviate the outside world’s concerns about its “health status”.
According to foreign media reports, in a memorandum to employees last Friday, Credit Suisse CEO Ulrich Korner told employees that the bank is at a critical moment and will disclose the latest information outlining the strategic assessment plan on October 27. He said that Credit Suisse's share price performance should not be confused with its capital strength and liquidity. In a talk update to its bankers and account managers on Sunday, Credit Suisse said it has nearly $100 billion in capital buffer and still expects its best equity capital to account for between 13% and 14% for the rest of the year.
data shows that as of the end of June this year, Credit Suisse's high-quality current assets were approximately US$238 billion. Credit Suisse's second-quarter financial report shows that as of the end of June, its leveraged exposure was approximately US$873 billion.
Currently, some of investors' concerns about Credit Suisse's health are focused on its leveraged financing portfolio. Credit Suisse said that as of June 30, its leveraged financing portfolio totaled US$5.9 billion. Credit Suisse is one of the main lenders in the leveraged acquisition of deal by Citrix Systems Inc., which cost a syndicate. Another area of focus for investors is its securitization products division, which has a total exposure to mortgage bonds and asset financing of about $75 billion. Credit Suisse said in July that it could introduce an external investor to reduce its investment in the sector, but has not signed an agreement.
Some people believe that the deteriorating market conditions show that Credit Suisse may face greater challenges in financing planned restructuring by issuing new shares, and its financing costs may rise significantly. The company has not yet formally contacted any shareholders regarding the issuance of new shares, people familiar with the matter said.
Credit Suisse said at the end of July that it would reorganize its investment banking business and exit some other businesses. Last year, the liquidation incident of Credit Suisse's client Archegos Capital Management greatly damaged the old investment bank, with losses of nearly US$5.1 billion.The liquidation was one of the biggest trading disasters ever, causing $10 billion to lose throughout Wall Street, and Credit Suisse was the hardest hit among banks.
By assets, Credit Suisse is the second largest bank in Switzerland , second only to UBS Group AG. Both are competing globally with their advantages in wealth management, investment banking and asset management. UBS also experienced an existential crisis, received government assistance during the 2008 financial crisis, and then carried out a large-scale restructuring.
It is worth mentioning that Credit Suisse has been expanding its layout in mainland China in recent years. Just in early September, Founder Securities announced that it would transfer the remaining 49% of Credit Suisse Securities' equity to Credit Suisse. After the transaction is completed, Credit Suisse Securities is expected to become the third wholly-owned foreign-owned securities firm in the mainland. Previously, JPMorgan Securities and Goldman Sachs Gaohua Securities had completed wholly-owned foreign holdings. At the end of September, Credit Suisse Securities announced the new general manager, Wang Jing, the "head of the country's largest private banking business. Before joining Credit Suisse two years ago, she served as the general manager of the private banking department of China Merchants Bank head office.
In addition to securities licenses, bank licenses are also in the layout of Credit Suisse. As early as 2021, Thomas Gottstein, then the global CEO of Credit Suisse Group, said in an exclusive interview with a reporter from the First Financial Daily that the Asia-Pacific region is the group's strategic focus, contributing about 20% of Credit Suisse's revenue, and plans to further increase its strategic layout in China in the next few years. In addition to securities licenses, Credit Suisse also plans to apply for a banking license to provide customers with more comprehensive investment banking and private banking services.
