Moving Suiftly down the chartsWhat was once a symbol of stability, is now slipping down into the doldrums.
- Shares in Credit Suisse have slipped to their lowest level on record as the investment bank goes through its longest losing streak in 11 years. Shares have dropped for ten days in a row – falling by 20% over November and by 66% since the start of the year.
- There’s a few reasons for the losing streak, one of which being an announcement two weeks ago that a large part of its securitized products business would be sold to Apollo Global Management – which doesn’t seem to have gone down well with investors.
- They also announced sweeping job cuts last month, and plans to split up its investment bank into three parts. To top it all off, the group warned that a loss of $1.6bn in Q4 is likely – it seems like no one is immune to this year’s brutal market downturn.
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A radical survival planThe embattled Credit Suisse is marching further into the doldrums with every passing day despite revealing a dramatic recovery plan.
- We’ll start with earnings, which were… not good. The Swiss bank reported a Q3 loss of over CHF4bn ($4.05bn), coming in way above estimates for CHF3.65bn ($3.6bn) – it comes in stark comparison to other European banks like Barclays, who fared rather well in Q3. A huge portion of that loss comes from an impairment related to a comprehensive strategic review.
- That strategic review is where things get interesting. Credit Suisse today announced a major overhaul that will include a multi-billion dollar capital raise, a carve out of its investment bank into a new entity called CS First Boston, and thousands of job cuts as it looks to return to profitability.
- Let’s just say shareholders were unimpressed, sending the stock down 20% on Thursday to its lowest ever close, wiping off nearly a fifth of the stock’s value in a few hours. The overwhelming opinion from analysts is that there are too many cracks in this plan and it seems “rushed” and “incomplete”. Let’s see if the bank can turn around its recent bad fortune.
Andy Kobel / Flickr
A buyback frenzyThe embattled Credit Suisse is picking up its weapons to fight back against the threat of its own demise, agreeing to buy back a bunch of its debt and seeing its share price rewarded.
- The troubled Credit Suisse offered to to buy back up to ₣3bn ($3.03bn) of debt securities on Friday as the bank tries to allay concerns over its financial health following rumors of a fresh capital raise, which brought the strength of its balance sheet into question.
- There was a definite air of investor relief following the news, with shares jumping over 13% on Friday to take their weekly gains to nearly 24%, closing at their highest level since late September. The bank’s five-year credit default swaps (CDS) fell 42 basis points on Friday after hitting a record high on Monday, and the price of its bonds ticked higher too.
- Everyone is still waiting for the overhaul plan they’ve been promised after CEO Ulrich Körner pledged to turn around the group by stripping back its investment bank, selling off a hotel, and increasing profitability. The plan is set to be announced at the end of this month and will probably help investors decide whether they’re gonna stick around.
Aamengus / Flickr
Give us some Credit, toot Suisse plsCredit Suisse’s troubles over the past few weeks look to be easing slightly, but they’re not out of the woods yet.
- Shares in Credit Suisse rose 4% in premarket trading yesterday, after having an extremely volatile Monday with concerns for the bank’s wellbeing spreading like wildfire. The bank’s been having trouble for weeks now and on September 23, the stock plunged more than 12% in one day.
- A report released over the weekend shook things up, saying that the group was in discussions with major investors about the group’s strategy, with analysts now concluding that the stock of the troubled bank has further to fall before recovery.
- Equities have been causing investors grief recently, with a team of researchers led by Andrew Garthwaite claiming that a diminishing money supply coupled with elevated stock valuations mean that they should be approached with caution until the market recovers.
A capital offense?Swiss banking giant Credit Suisse is having its global clout brought into question once again after another financial disaster worsens its already battered reputation.
- Credit Suisse shares sank to a record low on Friday, losing over 20% last week in their worst five-day period since March 2020 and taking the stock’s YTD losses to over 58% – once one of the most revered private banks in the world, Credit Suisse has had a rough couple of years and investors might be at the end of their tether.
- Rumors of a fresh capital raise were at the root of the declines. Reuters reported on Thursday that the embattled bank has been contacting investors about a fresh capital raise as a way to drive down costs and restore profitability – a strategic turnaround plan is set to be announced next month.
- But so far, it seems safe to say investors are not so keen on that plan. It would be the fourth time in seven years that the bank’s had to raise capital and will only further dilute existing shareholders – global macroeconomic conditions, more expensive financing and a declining equities markets will make it difficult to execute any kind of turnaround.
Andy Kobel / Flickr