Shares in Credit Suisse tumbled to a record low on Wednesday, leading a brutal day for banking stocks, as the embattled Swiss lender’s biggest shareholder said it would not make further investments in the firm.
A plunge of nearly 27 percent in Credit Suisse’s shares raised new worries about the banking industry on a day when broader European stock markets suffered sharp losses. The turmoil resurfaced on Wall Street, where investors were already anxious over the collapse of Silicon Valley Bank and Signature Bank last week. The shares of U.S. regional banks, which have been hard hit in recent days, continued their decline on Tuesday and the S&P 500 fell 1.4 percent in early trading.
Credit Suisse’s troubles, however, are largely separate, and of its own making. The firm has suffered blow after blow in recent years, from big trading losses to spying scandals that led to ouster of a chief executive.
The Swiss bank has hoped that a plan announced in October to restructure itself, a reorganization that called for spinning off its investment bank to concentrate on managing global elites’ wealth, would be enough to turn around its fortunes.
But it instead has continued to beat back negative news, including the disclosure on Tuesday that it had found “material weakness” in its financial reporting controls. That discovery came after queries by the Securities and Exchange Commission, which forced the company to delay publication of its annual report.
The latest setback came on Wednesday, when the chairman of the state-owned Saudi National Bank — which, as part of the firm’s turnaround plan, agreed to invest up to $1.6 billion for a nearly 10 percent stake, making it the Credit Suisse’s largest shareholder — ruled out any more investments in the firm.
But the reason the Saudi bank provided did not have to do with losing faith in Credit Suisse’s finances.
Asked on Bloomberg Television if Saudi National Bank would help finance additional turnaround efforts, the chairman, Ammar Al Khudairy, said, “The answer is absolutely not, for many reasons outside the simplest reason, which is regulatory and statutory.”
If Saudi National Bank were to raise its stake above 10 percent, it would be subject to additional Swiss regulations that Mr. Al Khudairy said he was not interested in becoming subject to.
Mr. Al Khudairy added that he was satisfied with Credit Suisse’s turnaround plan and believed the firm would not need additional capital, according to Reuters.
Still, Credit Suisse’s shares fell as low as 1.58 Swiss francs on Wednesday, a new low.
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