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Credit Suisse slides to 27-year low amid selloff, overhaul
[ZURICH] Credit Suisse Group AG plunged to a 27-year low as a selloff across the industry compounded doubts about chief executive officer Tidjane Thiam's restructuring plans.
A rout in bank stocks deepened on Thursday after France's Societe Generale SA missed fourth-quarter profit estimates, with earnings declining 35 per cent at the investment bank.
Credit Suisse shares closed at 12.31 Swiss francs (S$17.65), down 8.4 per cent, bringing losses to about 43 per cent this year. That's more than the 41 per cent drop in 2011, at the height of Europe's fiscal crisis.
"It's a lack in trust in the ability of banks to earn as much as they once did," said Benno Galliker, a trader at Luzerner Kantonalbank AG.
"There's still decent money but not as much as they once did. They can't take as much risk as they once did."
Banks across Europe have reported a slump in trading revenue, hurt by a drop in energy prices, stricter capital requirements and cooling emerging economies.
Societe Generale, France's second-largest bank, signaled on Thursday that it may miss its profitability target for this year, citing 'headwinds' including volatile markets and record low interest rates.
At Credit Suisse, the shares have lost almost half their value since October, when Mr Thiam embarked on an overhaul as the retreat from equities intensified.
The CEO is seeking to bolster earnings by expanding wealth management while cutting costs and reducing exposure to riskier activities, a strategy that involves shrinking the investment bank.
"It's not a great time to be a bank," Mr Thiam said in a presentation to investors Wednesday.
"So I'm using the current challenging environment to accelerate the transformation that I'm driving."
The bank's US$2.5 billion of 6.25 per cent additional Tier 1 bonds fell three cents on the euro to a record low of 84 US cents on Thursday, according to data compiled by Bloomberg.
Coupons on the notes may be canceled and the principal written off in a crisis. The cost of insuring the bank's subordinated securities against default rose 27 basis points to 257 basis points, the highest level since September 2012, amid a wider sell-off in credit markets.
Given the environment, Mr Thiam said his task now is to convince investors and employees that he will deliver on his plan.
"There is a credibility gap. We have it externally, we have it internally," he said.
"We need to execute and we need to show you that we are executing."