Credit Suisse shares fall to record low as top investor rules out more funding

Credit Suisse shares have plunged more than 20% to record lows after its largest shareholder, Saudi National Bank (SNB), said it would not be able to stump up more cash for the beleaguered Swiss bank because of regulatory restrictions.

SNB’s chair, Ammar al-Khudairy, said he would not be able to spend any more money to support Credit Suisse, since the Middle Eastern lender had already accumulated a 9.9% stake. “Well, we can’t … We cannot because we would go above 10%,” he told Reuters in an interview.

However, Khudairy said he did not believe Credit Suisse would need a fresh capital injection. “I don’t think they will need extra money; if you look at their ratios, they’re fine. And they operate under a strong regulatory regime in Switzerland and in other countries,” he said on the sidelines of a conference in Riyadh.

However, the prospect of limits on cash from white knight investors from the Middle East still spooked markets, sending Credit Suisse shares down more than 15% to a record low of 1.73 Swiss francs a share, before trading was halted. Investors also sold European banking stocks, which have already been battered this week after Silicon Valley Bank’s collapse.

Shares in other big European banks slumped on the news, with trading briefly halted and then restarting in Société Générale, BNP Paribas, Monte dei Paschi di Siena and UniCredit after dropping more than 10%.

The Swiss lender UBS dropped 5.7% and Germany’s Deutsche Bank slipped 8%. UK-headquartered Standard Chartered fell 5.8% and HSBC, which bought the UK operations of the collapsed US lender Silicon Valley Bank in a government-brokered deal on Monday, dropped 4%.

Slumping banking and insurance stocks sent the FTSE 100 sliding by 2.5% to its lowest level since December last year. However, the Bank of England said the UK banking system was not at risk. The central bank, which is in charge of monitoring financial stability, referred the Guardian to their statement released earlier this week, which said: “The wider UK banking system remains safe, sound, and well capitalised.”

The Guardian understands that Bank of England staff are continuing to monitor developments in the financial sector closely.

The comments by SNB’s chair come only weeks after Credit Suisse’s former top shareholder, the Chicago-based investment firm Harris Associates, revealed it had dumped its entire stake in the lender in recent months. It said it had become frustrated with Credit Suisse’s strategy, which had so far failed to stem losses and an exodus of clients as it continued to be bogged down by a string of scandals. The bank reported a 7.3bn Swiss francs (£6.6bn) net loss for 2022.

SNB gained its 9.9% stake in Credit Suisse this past autumn, after ploughing 1.5bn Swiss francs into the lender as part of a 4bn Swiss franc capital fundraising to support Credit Suisse’s turnaround plan, which is meant to cut the size of its investment bank and focus more on managing assets for wealthy clients.

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Khudairy told Reuters he saw Credit Suisse as an opportunistic investment and that it would prove its worth as the turnaround plans were carried out. “We are happy with the plan, the transformation plan that they have put forward,” SNB’s chair said. “It is a very strong bank.”

Credit Suisse declined to comment.