Credit Suisse shares hit record low on outflow claims probe
CREDIT Suisse Group slumped to a record low on a report that the chairman is facing a probe over comments he made that the firm had put a stop to huge client outflows after a run of share declines.
Swiss financial markets regulator Finma is seeking to establish whether the comments from bank representatives including chairman Axel Lehmann were misleading, according to a Reuters report. In a Bloomberg TV interview on Dec 2, Lehmann said that outflows “basically have stopped” after it had disclosed on Nov 23 the loss of 84 billion francs (S$121.4 billion) of client assets. By the end of the quarter, that figure had risen to 110.5 billion francs.
The remarks were made before the close of a crucial US$4 billion capital raise and helped arrest a sharp decline in the share price. Credit Suisse chief executive officer Ulrich Koerner told analysts on a call this month that more than 85 per cent of the outflows came in October and November. That would leave as much as 17 billion francs coming in December after Lehmann’s remarks.
The stock slid as much as 9 per cent on Tuesday (Feb 21) in Zurich, before closing down about 4 per cent at 2.66 francs to give the bank a market value of 10.6 billion francs. The shares have declined about 4 per cent this year.
Koerner’s pledge to stem declines and return the bank to profitability by 2024 hinges on a massive outreach programme to woo back client cash. It’s also carving out the volatile investment bank, selling capital-intensive businesses and slashing 9,000 jobs to help cut costs.
This month, Credit Suisse reported some progress in the steps needed to execute the plan, including a path to an initial public offering or spinoff of the new CS First Boston, and showed tentative signs that customer confidence is returning.
Finma and Credit Suisse declined to comment on the report.
“We’d think Finma would not be looking to further destabilise the bank by going after him aggressively,” Adam Terelak, an equity research analyst at Mediobanca, said. “This just adds another headache for the bank that is struggling to stabilise itself post record client outflows.”
Many brokers cut their price targets to new street lows, including Kepler Cheuvreux, after the bank earlier this month warned that it would be posting a substantial loss for 2023, adding to a string of hits for investors over recent years.
In cases of market manipulation, Switzerland’s financial regulator can invoke sanctions including banning individuals from working in certain industries. However, it does not have the power to issue fines and cannot seize evidence or search premises.
Outflows concerns
This isn’t the first time a top Credit Suisse executive has come under scrutiny in recent years. Former chairman Antonio Horta-Osorio was forced to step down after breaching Covid-19 quarantine rules and ex-CEO Tidjane Thiam resigned over a scandal that involved the bank spying on a former executive.
The bank is now operating with an entirely new executive board and more than half of its board of directors are new within the last two years.
Around the same time as the outflows in the fall, Credit Suisse was marketing a rights offering to raise capital at an offer price of 2.52 Swiss francs. The outflows announcement sent the stock close to that level, increasing the risk that underwriting banks would be left holding the shares, though ultimately the rights offering was successful.
The uncertainty around the outflows, though, drove the Swiss bank to one of its longest run of share losses ever. BLOOMBERG
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