Credit Suisse Group AG shares surged the most on record after the lender tapped the Swiss National Bank for as much as 50 billion francs (US$54 billion or $72.96 billion) and offered to repurchase debt, seeking to stem a crisis of confidence that has sent shockwaves across the global financial system.
The Zurich-based bank will borrow the money from a central bank liquidity facility and is making a tender offer to buy back up to three billion francs of dollar- and euro-denominated debt, according to a statement released around 1.45 am Zurich time Thursday. Meanwhile, Credit Suisse’s top shareholder said “everything is fine” and the bank isn’t likely to seek more capital, the day after his comments helped spark the biggest-ever slump in the stock.
The announcement followed a frantic trading session in which worries about Credit Suisse’s financial health roiled global markets, alarmed regulators across Europe and the US and prompted some firms to reassess their exposure to the bank.
The moves - unprecedented at a major Swiss lender since the 2008 financial crisis - are the biggest yet to shore up finances at Credit Suisse. The bank’s shares rose as much as 40% after opening in Zurich on Thursday.
The stock had slumped by as much as 31% on Wednesday, and its bonds fell to levels that signal deep financial distress, as persistent doubts over the scandal-ridden lender combined with a global selloff in banking stocks.
“These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation,” Chief Executive Officer Ulrich Koerner said in the statement. “My team and I are resolved to move forward rapidly to deliver a simpler and more focused bank built around client needs.”
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Credit Suisse announced at least its second debt repurchase in just the past six months as it looks to restore investor confidence. It offered to buy back about US$3 billion of its debt in October last year, saying at that time it wanted to “take advantage of market conditions to repurchase debt at attractive prices.”
The latest tender offer applies to ten senior debt securities for up to US$2.5 billion, as well as four euro-denominated senior debt securities for as much as 500 million euros.
Meanwhile, the borrowing comes in the form of a covered loan facility as well as a short-term liquidity facility, which are fully collateralized by high quality assets, the bank said. As of the end of 2022, Credit Suisse had a CET1 ratio of 14.1% and an average liquidity coverage ratio of 144%, which has since improved to approximately 150% as of March 14, it added.
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Switzerland’s second-largest lender, which traces its roots back to 1856, has been battered over the last several years by a series of blowups, scandals, leadership overhaul and legal issues. The company’s 7.3 billion franc loss last year wiped out the previous decade’s worth of profits, and the bank’s second strategy pivot in as many years has so far failed to win over investors or halt client outflows.
The lender said in its annual report earlier this week that client outflows continued into March, though Koerner later said on Bloomberg Television that the bank attracted funds after the collapse of Silicon Valley Bank.
The ground for Credit Suisse’s sudden lurch had been laid earlier in the week as investors sought to move away from banking risk after turmoil induced by the failure of the US lender. The Swiss bank’s stock then plunged to the lowest level on record after the chairman of Saudi National Bank said it wouldn’t boost its share of the bank past the current level of just under 10%.
Koerner on Tuesday asked for patience and said the bank’s financial position is sound. He pointed to the firm’s liquidity coverage ratio, which indicates the bank can handle more than a month’s worth of outflows in a period of stress. Chairman Axel Lehmann had said at a conference on Wednesday that government assistance “isn’t a topic” and the firm’s efforts to return to profitability aren’t comparable to the severe liquidity issues hitting smaller lenders in the US.
Bloomberg reported earlier that the government, central bank and Finma were in contact to discuss ways to stabilize Credit Suisse. Ideas floated — beyond the public show of support — included a separation of the bank’s Swiss unit and a long-shot orchestrated tie-up with larger Swiss rival UBS Group AG, people familiar with the matter said, cautioning that it’s unclear which, if any, of these steps would actually be executed.