Source of this article: Times Weekly Author: Zhou Mengmei
Credit Suisse bankruptcy storm is still fermenting. Will the Swiss National Bank take action at a critical moment?
On October 5, Swiss National Bank member Maechler publicly stated that Swiss National Bank is closely following the news of Credit Suisse (CS.NYSE). Previously, media reported that a large investment bank was on the verge of bankruptcy. The investment bank is believed to be Credit Suisse. Affected by this news, Credit Suisse shares fell as much as 11.5% this Monday, with bonds falling to historical lows.
The market has poor confidence in Credit Suisse. As of October 3, Credit Suisse's 5-year credit default swap (CDS) reached its highest level since the 2008 financial crisis. swap , which is linked to Credit Suisse , shows that the probability of bond defaults in this Swiss bank is about 23%.
After a series of events, Credit Suisse's performance and share price performance were poor. As of October 5, its stock price closed at $4.22, with a cumulative decline of 57.73% in the past year. “We are watching the situation change,” Maechler said, who is developing a strategy to be released at the end of October. Based on this, the outside world believes that the Swiss government may provide credit liquidity support for Credit Suisse.
Source: Tuchuang Creative
Credit Suisse is an old financial institution with a long history of 166 years. It is one of the benchmark banners of the global financial industry. It mainly engages in personal, corporate financial services, investment banking and asset management businesses. According to a report issued by data agency SP Global Market Intelligence, Credit Suisse ranked 45th in the global bank scale ranking in 2022, with total assets exceeding US$892 billion. This size is 1.5 times the assets held by Lehman Brothers when crashed (about $600 billion).
Ten years ago, Credit Suisse once ranked among the world's five major investment banks, competing on the same stage with Goldman Sachs, JPMorgan Chase . However, Credit Suisse has experienced a series of negative events in recent years, and is gradually drifting away from its dream of first-tier investment banks.
Last year, hedge fund Archegos and financial services company Greensill went bankrupt one after another, causing Credit Suisse to suffer losses. Archegos alone suffered $5.1 billion in losses; Greensill Capital went bankrupt, and Credit Suisse lost $3 billion in financial support. In addition, in just a few years, Credit Suisse has experienced a series of negative blows such as account leaks, suspected money laundering, and the closure of investment fund . In this case, Credit Suisse had to raise funds, stop stock buybacks, cut dividends and conduct a full restructuring.
At the moment, Credit Suisse's situation is hard to be optimistic. In the second quarter of this year, Credit Suisse achieved net revenue of 3.65 billion Swiss francs , a year-on-year decrease of 29%; a net loss of 1.59 billion cherry francs (approximately RMB 11.1 billion), which is the third consecutive quarter of losses in Credit Suisse.
market is also bearish on Credit Suisse. According to data analytics firm S3 Partners, the bank's net shorts rose by 25.4 million shares in the past week, an increase of 51%. rating agency is also downgrading its rating. On August 1, Standard & Poor's company considered Credit Suisse's poor performance in the first half of the year, management personnel changes and lack of clear strategies, and expected it to remain weak in the medium term, reducing its outlook from "stable" to "negative rating" with a rating of BBB; on August 4, Fitch also downgraded Credit Suisse's rating from BBB+ to BBB.
Credit Suisse is actively responding and has also received support from the outside world.
Last week, Credit Suisse CEO Ulrich Krner sent employees a memorandum saying that he should not confuse "daily stock prices" with (Credit Suisse's) "strong capital base and liquidity situation" and insisted that the upcoming restructuring would ensure a "long-term, sustainable future." He hopes to use this to appease employees and to bring back market confidence. In the
memorandum, "It is completely wrong to speculate that we have liquidity problems." Credit Suisse still has nearly $100 billion in capital buffer , and at the end of the second quarter, the bank had nearly $238 billion in high-quality current assets.
In order to get out of the predicament, Credit Suisse has also taken a series of measures, including withdrawing from the US market, laying off large-scale employees (a total of 45,000 employees, firing more than 10% of its employees), and restructuring its investment bank.On October 6, news came out that Credit Suisse was considering splitting investment banking business to external investors.
The Swiss government may take action. The Swiss government wants to provide public liquidity support to systemically important banks and appoints the Ministry of Finance to formulate relevant rules by mid-next year. Although the Swiss government's relevant relief bill will not be passed until next year, relevant Swiss government officials may provide Credit Suisse in advance based on this.
Market rumors, alarmist. Several analysts believe that the Credit Suisse crisis is not a recurrence of the "Lehman moment", but more of a market overreaction.
"Credits' situation is more like an isolated case than a systemic problem - Credit Suisse is paying the price for negative events such as Archegos Capital's liquidation and Greensill Capital's bankruptcy in recent years." A financial industry insider pointed out that it is very different from 2008. At that time, people "suddenly realized" the general losses of the entire financial system, and banks at that time did not face such strict supervision as they are today.
China Post Securities Research Institute pointed out that Credit Suisse CDS is at a high level, indicating an increase in risk, but the swap linked to Credit Suisse shows that it has a bond default probability of about 23% in five years, far from reaching an unsettling level. If the worst happens, Credit Suisse will also have a much weaker impact than Lehman Brothers.
