Credit Suisse crashes to record low as it warns of ‘material weaknesses’ in its financial reporting
Crisis-racked Credit Suisse hit a record low as it warned of ‘material weaknesses’ in its financial reporting.
The alarm was raised yesterday just as the banking giant was caught up in a global sell-off of bank stocks.
The disclosure rattled investors already nervous about Credit Suisse’s prospects following the collapse of Silicon Valley Bank (SVB) in the US, the biggest such failure since the 2008 crisis.
Appeal for calm: Credit Suisse chief exec Ulrich Koerne appealed for patience from investors during an appearance on Bloomberg TV
Shares fell 6 per cent to an all-time low and though they recovered later amid a rebound on Wall Street, the scandal-hit lender’s value is 97 per cent lower than at its peak in 2007.
The cost of insuring against a Credit Suisse default also rose to a record high. Such was the anxiety sparked by the latest development that the bank felt compelled to issue a tweet confirming that annual results published just last month remained ‘accurate and reliable’.
Credit Suisse had already been caught up in worldwide banking sector turmoil after the demise of SVB, America’s 16th biggest bank, was followed by that of New York’s Signature Bank over the weekend.
Regulators have been scrambling to contain the fall-out. But fears grew at the start of this week over the health of the wider sector with European lenders not immune and already-weakened firms, such as Credit Suisse, looking especially vulnerable.
It even prompted Rich Dad Poor Dad author Robert Kiyosaki, a prominent investor who had previously predicted the 2008 demise of Lehman Brothers, to suggest that the Swiss lender would be ‘the next bank to go’.
The release of the bank’s annual report – already delayed last week following a request from US stock market authorities – proved the catalyst for renewed jitters yesterday.
It revealed the firm had identified ‘certain material weaknesses in our internal control over financial reporting’ for 2022 and 2021.
The report also disclosed that customers were still pulling out funds even after it reported staggering outflows of £99billion in the fourth quarter of last year.
‘These outflows stabilised to much lower levels but had not yet reversed as of the date of this report,’ it said.
Swiss regulator Finma said on Monday that it was seeking to identify any contagion risks for the country’s banks and insurers resulting from the US crisis.
Credit Suisse chief executive Ulrich Koerner appealed for patience from investors during an appearance on Bloomberg TV – and sought to play down the fall-out from SVB.
‘SVB is a very recent thing which happened over the weekend and yesterday,’ he said. ‘So far it’s pretty calm.
‘SVB is a very different situation. We are following materially different and higher standards when it comes to capital, funding, liquidity and so on.’
Koerner admitted that ‘nobody is pleased by the share price development’ but said the bank was ahead on some metrics of its turnaround plan.
‘We said it’s a three-year transformation and you can’t come after two months ‘Why is everything not done?’,’ he said.
Russ Mould, investment director at AJ Bell, said: ‘While the immediate fallout from the SVB collapse may have been contained for now, the edginess around the banking sector isn’t helped by the latest revelations from Credit Suisse.’
Last month, Credit Suisse reported an annual loss of £6.5billion for 2022. It has faced a series of scandals over the last couple of years including multi-billion pound hits related to the collapses of US investment firm Archegos and supply chain finance firm Greensill Capital.
The bank was also convicted in a money laundering case in Switzerland and late last year a frenzy of speculation about its financial health rattled confidence.