Written by Oliver Hurt and Michael Shields
ZURICH (Reuters) – Shares of Credit Suisse fell as much as 10 percent on Monday, reflecting market concerns ahead of a restructuring plan that is due to bring in third-quarter results at the end of October.
A source familiar with the situation said that the Swiss regulator FINMA and the Bank of England in London, where the lender has a main position, were monitoring the situation at Credit Suisse and working closely together.
The source added that Credit Suisse’s recent problems are well known and there have been no major developments recently.
The Bank of England, FINMA and the Swiss Finance Ministry declined to comment.
Chief Executive Ulrich Koerner told employees last week that Credit Suisse, whose market value fell to 9.73 billion Swiss francs ($9.85 billion) on Monday, has strong capital and liquidity.
The Financial Times reported on Sunday that bank executives spent the weekend reassuring major clients, counterparties and investors about liquidity and capital.
A spokesperson for Credit Suisse declined to comment on the FT’s report, which said the weekend calls followed a sharp rise in spreads on credit default swaps (CDS), which provide protection against the company’s default.
Credit Suisse’s euro-denominated bonds fell to record lows, as the Swiss bank’s longer-dated bonds suffered the biggest drops.
In July, Credit Suisse announced its second strategic review in a year and replaced its CEO, bringing in restructuring expert Koerner to scale back investment banking and cut costs by more than $1 billion.
It said it is considering measures to strengthen its flagship wealth management franchise, downsize its investment bank to a “light capital and advisory-led” business, and is evaluating strategic options for its securitized products business.
Citing people familiar with the situation, Reuters reported last month that Credit Suisse was looking to investors for fresh money while trying to fix it.
JPMorgan analysts said in a research note that, based on its financial statements at the end of the second quarter, they see Credit Suisse’s capital and liquidity as “healthy.”
Analysts added that given that the bank has indicated a near-term intention to maintain the CET1 capital ratio at 13-14%, the end of the second quarter ratio is within this range and the LCR is well above requirements.
He noted that Credit Suisse’s total assets amounted to 727 billion Swiss francs ($735.68 billion) at the end of the second quarter, of which 159 billion francs were in cash and due from banks, while 101 billion francs were commercial assets.
Analysts said that while Credit Suisse’s spreads widened, this should be viewed in the context of expanding credit spreads across the sector, which would have been expected in an environment of higher interest rates as macroeconomic uncertainty persists.
Over the past three quarters alone, Credit Suisse’s losses have increased by nearly CHF4 billion. Given the skepticism, the bank’s financing costs soared. German Bank (ETR): Analysts in August estimated the capital shortfall at at least CHF4 billion.
Shares of Credit Suisse, which have fallen by more than half this year, slipped from their early morning lows and fell 7.4% to CHF3.68 at 0927 GMT.
(1 dollar = 0.9882 Swiss francs)