Credit Suisse, considered by investors as “the weakest link” in Swiss banking, saw its share price plunge Monday as markets were lashed by fears surrounding the collapse of US lender SVB.
Shares in Switzerland’s second biggest bank fell rapidly on the Swiss stock exchange, plummeting by as much as 14.6 percent on Monday to a record low of 2.115 Swiss francs.
The crisis-wracked bank’s shares closed down 9.58 percent at 2.26 francs each.
Other European banks also took a beating amid the market turmoil after Silicon Valley Bank (SVB) — a key lender to start-ups across the United States since the 1980s — collapsed last week following a sudden run on deposits.
Germany’s Commerzbank closed down nearly 13 percent, Spain’s Santander shed more than seven percent and the Netherlands’ ING fell nearly six percent.
In Switzerland, Credit Suisse’s main rival UBS saw its shares shed 7.66 percent to 17.71 francs a piece, dragging down the Swiss stock exchange’s main SMI index by over one percent.
While particularly hard-hit by the market upheaval, Credit Suisse did not have significant exposure to SVB, according to a source familiar with the situation, who asked not to be named.
– ‘Weakest link’ –
“In the US, the market is looking at which are the second weakest” banks, “and in Switzerland it is obvious that Credit Suisse is the weakest link,” Andreas Venditti, an analyst at Swiss investment managers Vontobel, told AFP, explaining why Credit Suisse may have taken such a beating Monday.
Credit Suisse has already lost 81 percent of its value since it was rocked by the bankruptcy of the British financial firm Greensill in March 2021 — the first in a series of scandals that have weakened the Zurich-based bank.
Venditti pointed out that Credit Suisse’s shares were already “volatile” before the SVB collapse.
“That’s why I think Credit Suisse shares are losing much more than UBS,” he said.
The bank’s stock has repeatedly convulsed as it undergoes a major restructuring effort, and the bank has continued to see its value drop.
Under the weight of restructuring costs, the bank reported in early February a net loss of 7.3 billion Swiss francs ($7.76 billion) for the 2022 financial year.
That came against a backdrop of massive withdrawals of funds by its clients, including in the wealth management sector — one of the activities on which the bank intends to refocus.
And one of its biggest shareholders, US investment firm Harris Associates, has sold off its entire stake in the embattled bank, its deputy chair told the Financial Times newspaper last week.
– Following situation ‘closely’ –
The SVB collapse saw US authorities scrambling all weekend to reassure the markets, and on Sunday night they stepped in to protect all the bank’s depositors while regulators took over a second troubled lender.
“Americans can have confidence that the banking system is safe. Your deposits will be there when you need them,” US President Joe Biden insisted Monday.
As European bank shares fell, Germany also moved Monday to quell SVB contagion fears, with its finance watchdog Bafin insisting the fallout posed no threat to financial stability.
Contacted by AFP, Swiss financial regulator Finma meanwhile said it was following the situation “closely”.
It declined to comment further on the specific situation, but said that “as is usual practice with such events, Finma evaluates the direct and indirect exposure of the banks and insurance companies it monitors.”
The aim, it said, is “to identify in time any possible big risks and a potential for contagion.”