Credit Suisse shares CRASH to record low after bids by executives to reassure investors over health of Swiss bank backfired
Traders and bankers rushed to buy Credit Default Swaps after the share price fell
The company’s five-year CDS rose at the fastest rate since the financial crisis
The banking giant’s share price has fallen by 25 per cent in the past three weeks
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Credit Suisse shares fell to a record low on Monday after a bid by executives to reassure investors about the Swiss bank’s health backfired.
Traders and bankers rushed to buy Credit Default Swaps (CDS) – an insurance tool if the company goes bankrupt – after the share price fell by 10 per cent.
Senior executives at the company called its biggest customers to reassure them that its position was safe and secure, according to the Financial Times.
And last week chief executive Ulrich Koerner said the bank had a “strong capital base and liquidity position”.
He urged employees not to confuse ‘day-to-day share price’ with the company’s underlying performance.
Credit Suisse’s five-year CDS rose by 100 basis points – also known as a charge or rate on a contract – the highest since the financial crisis.
At the same time, the share price reached a historic low on Monday.
Traders and bankers rushed to buy Credit Default Swaps (CDS) – an insurance tool if the company goes bankrupt – after the share price fell by 10 per cent.
Insurance: CEO Ulrich Koerner said the bank had a ‘strong capital base and liquidity positions’
Credit Suisse shares have lost 25 percent of their value in the past three weeks.
The emergence of the note comes less than a week after the bank released a statement to investors saying it is ‘well underway with its comprehensive strategic review’.
It said it aims to ‘create a more focused, agile group’ and will release details of a ‘transformation’ plan on 27 October.
But Koerner said in the memo, first reported on Reuters and seen by The Mail on Sunday, that the bank is at a ‘critical moment’.
‘I am aware that there is a lot of uncertainty and speculation both outside and within the company.’
He said he would make sure you hear from me directly during this challenging time. I will therefore send an ongoing update to you all until then’.
Koerner was promoted to the top job in July. The bank aims to cut costs by more than $1bn (£897m) and sell parts of the business amid reports it could cut 5,000 jobs.
The restructuring plans are part of persistent efforts to draw a line under a series of scandals linked to the Swiss lender.
It was embroiled in the collapse of controversial lender Greensill Capital and US hedge fund Archegos Capital in 2021. It also admitted last year to defrauding investors as part of the historic Mozambique “tuna bond” loan scandal, which left it fined more than £350 million.
But the board is keen to avert a further negative spiral that could affect their recovery plans.
Koerner said in the note: ‘There will undoubtedly be more noise in the markets and the press between now and the end of October. All I can tell you is to stay disciplined and be as close as ever to your clients and colleagues.’
‘I know it’s not easy to stay focused in the midst of the many stories you read in the media – especially given the many factually inaccurate statements that come out.
“That said, I trust you don’t confuse our day-to-day share price performance with the bank’s strong capital base and liquidity position.”
The market’s fears about Credit Suisse’s position follow the Bank of England’s decision to buy UK government bonds, after markets rallied over Kwasi Kwarteng’s latest budget.
Tax cuts and an energy price cap – which could cost the taxpayer £170 billion – spooked short-term gilt markets and sent prices wild.
Rising interest rates put many people’s pensions at risk through liability-driven investments that were heavily leveraged and wrapped in government bonds.