Credit Suisse Banking Crisis: Will it Collapse?

Credit Suisse is one of the world’s biggest banks. Founded in 1856, it has been a pioneer of financial innovations. Its current problems date back to a string of missteps and compliance failures that have cost several top executives their jobs. These include trading losses from Archegos and Greensill Capital, as well as money laundering charges and corporate espionage.

Credit Suisse Investment Banking

Credit Suisse Investment Banking focuses on advising clients on mergers and acquisitions, corporate finance and capital markets. It is a major player in these sectors and has a long history of winning big deals.

Chief Executive Officer Ulrich Koerner has plans to reduce risks and costs, and protect the bank’s best-performing parts. Credit Suisse is seeking investors to inject money into the new venture. The new business will be a partnership model, and key employees will be given equity. 

Credit Suisse Crisis

Credit Suisse’s crisis has triggered a crisis in stock markets around the world. The 166-year-old lender’s shares plunged as much as 30% on Wednesday after its biggest shareholder, Saudi National Bank, said it would not provide any further financial assistance. The turbulence echoed concerns that the latest banking woes could herald a fresh global economic downturn. Shares of big banks fell sharply across the US, Europe, and Asia.

The bank has recently faced scandals involving corporate espionage, alleged misconduct, sanctions busting, money laundering, and corruption. Its stock and bonds fell sharply and some of the world’s largest banks such as BNP Paribas raced to shield their finances from the potential fallout by snapping up contracts known as credit-default swaps.

Credit Suisse to Borrow Money From Swiss National

Credit Suisse Group AG (CSGN) has announced plans to borrow $54 billion from the Swiss National Bank. The lender is taking decisive action to boost liquidity after a day in which its shares plunged by more than 25% after its biggest shareholder said it would not increase its stake.

Shares of Credit Suisse fell to their lowest level in almost a decade following the news, which comes as it tries to repair its reputation after a raft of scandals tarnishing its image.

Credit Suisse has been hit hard by customers who pulled their money and a series of missteps and compliance failures that cost it 7.3bn Swiss francs in losses last year. Investors and regulators are focused on how it copes with a raft of crises that could threaten its reputation and financial stability.

Why Credit Suisse Shares Are Falling

Credit Suisse shares have been falling for six days following the bank’s annual report which revealed high cash outflows and found weaknesses in its financial reporting. Management is working to restructure the investment bank and return it to a profitable state.

However, the swooning stock is trading at a huge discount and all the analysts wouldn’t recommend buying it just yet. Despite the bank’s turnaround story, analysts still think there’s a lot of work ahead of it and they want investors to wait for more evidence that it’s working before investing.

Shares have plunged after Credit Suisse’s largest shareholder ruled out further equity injections for regulatory reasons. That sent global markets into a tailspin Wednesday and the cost to insure against the lender’s bonds hit an all-time high.

Credit Suisse Layoffs

Credit Suisse is cutting 9,000 jobs before 2025 in order to reduce its costs. It also has plans to reduce its risky assets and spin off the most profitable parts of its investment bank.

It will also sell its securitized-products group to a consortium of investors which will be led by private equity firm Apollo Global Management. The Swiss bank is aiming to cut about 80% of its capital and reduce costs in a bid to make the business more stable.

The bank has said it is implementing a complex overhaul plan to restructure its investment bank and reallocate about 80% of its capital toward the core, higher-return businesses.