RIYADH: Credit Suisse shares plunged as much as 11.5 percent on Monday amid concerns about the bank’s ability to revamp its business and bolster its capital after a string of losses precipitated a strategy reboot.
According to a Financial Times report, Credit Suisse executives spent the weekend reassuring large clients, counterparties and investors and have requested less than 100 days to deliver a new turnaround strategy.
Switzerland’s second-largest bank has been facing turbulence in the market for at least one year. In March 2021, the company had a market capitalization of 30 billion Swiss francs ($30.35 billion), while it is just 10 billion Swiss francs now.
As an indication of the growing concern, the price of so-called credit default swaps, or CDS, on the bank’s bonds suddenly surged last week.
These derivative financial products tend to be taken out by investors to protect against a payment default — a deteriorating view of the Credit Suisse’s creditworthiness.
The swaps now price in a roughly 23-percent chance that the bank defaults on its bonds within five years, according to Bloomberg News, which stresses nonetheless that they remain “far from distressed.”
On Friday, Credit Suisse CEO Ulrich Koerner reassured staff that the bank has a strong capital base and told the employees that he will send regular updates on the progress until it announces its new strategic plan on Oct. 27.
According to a Bloomberg report, Credit Suisse is now busy finalizing plans that will likely see sweeping changes to its investment bank and may even result in cutting its workforce by thousands.
Last week Credit Suisse revealed that it is considering a possible sale of some assets and business as part of its strategic plan. Bloomberg reported that the bank is eyeing selling its securitized products trading unit, and is weighing the sale of its Latin American wealth management operations excluding Brazil.
The report added that Credit Suisse is also considering reviving the First Boston brand name.