Credit Suisse Group (CSGKF) shares hit a fresh record low Wednesday after a key Saudi investor declined to provide additional support to the troubled Swiss lender in a move that amplified concerns for the health of the global financial sector.
Saudi National Bank, which owns a $1.5 billion stake in Credit Suisse following the group's capital raising effort last year, said it was satisfied with the bank's recent turnaround plans -- which include the separation of its investment banking unit -- and noted that its equity capital ratios were consistent with Swiss regulations, but chairman Ammar Al Khudairy the bank can't go over its current 9.9% threshold due to a 'regulatory issue'.
Chairman Axel Lehmann rejected the notion of seeking government assistance, telling a financial sector conference in Riyadh that the bank has 'strong capital ratios, a strong balance sheet" and that taxpayer support "isn't a topic" being discussed by the board.
European bank shares were caught in the Credit Suisse downdraft, as well, amid lingering concerns over the impact of Silicon Valley Bank's collapse late last week and the affect that surging central bank rate hikes will have on balance sheets and business models ahead of the European Central Bank's Thursday policy meeting in Frankfurt.
Earlier this week, in fact, Swiss financial regulator FINMA said it was "evaluating the direct and indirect exposure of the banks and insurance companies it supervises to the institutions concerned", referencing the Silicon Valley Bank failure, adding that it's "closely monitoring the situation."
The regional Stoxx 600 Banking Index was marked 6% lower in late Frankfurt dealing Wednesday, and on pace for its biggest weekly drop since the depth of the pandemic in the spring of 2020, while bluechip names such as BNP Paribas were halted from trading in France following big moves to the downside
Credit Suisse's U.S.-listed shares were marked 16.5% lower in early trading to change hands at $2.10 each. Its shares in Zurich were marked 28.1% lower and changing hands at a record low of 1.60 Swiss francs.
U.S. bank shares were under added pressure in pre-market trading Thursday, as well, with JPMorgan Chase (JPM) falling 5%, Citigroup (C) down 5.5% and Bank of America (BAC) slumping 2.05%.
U.S. slumped heavily to the downside, as well, with the S&P 500 falling 70 points by early afternoon trading -- and coming within 10 points of turning negative for the year -- while Dow Jones Industrial Average booked a 655 point slump.
Benchmark 2-year Treasury note yields were marked another 60 basis points lower from last night's levels at 3.807% in overnight trading, with 10-year paper pegged at 3.399%. The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 1.32% higher at 104.967.
Interest rate traders were also more cautious with respect to the Fed's likely reaction to the simmering bank crisis, which was complicated by a modestly faster-than-expected reading of core inflation that marred an otherwise steady February CPI report yesterday.
The CME Group's FedWatch suggests a 58% chance that the Fed will hold rates steady at between 4.5% and 4.75% when it meets next week in Washington, although the bulk of wagers suggest a 25 basis point hike at this meeting, and again in May, before the Fed considers any kind of pause in its tightening cycle.
Credit Suisse has been suffering from a host of scandals and mis-steps over the past years that have triggered an exodus of client deposits from both its bank and wealth management divisions and said earlier this week that it found "material weaknesses" in its financial reporting and internal controls.
The bank reported outflows of around $120 billion over the three months ending in December, causing it to fall "below certain legal entity-level regulatory requirements" at certain points during the quarter, Credit Suisse said in its delayed annual report.
