Credit Suisse plans to borrow up to SFr50bn ($54bn) from the Swiss central bank and buy back about SFr3bn of its debt, in an effort to boost liquidity and calm investors days after the bank’s share price plummeted.
The Swiss National Bank has said that it is willing to provide a liquidity backstop to Credit Suisse after the shares of the troubled lender fell as much as 30 percent.
The sale comes after the chairman of Saudi National Bank, a major Credit Suisse shareholder, stopped investing. It also followed turbulent trading in global banking stocks due to the collapse of Silicon Valley Bank.
In a statement on Thursday, Credit Suisse said it had taken the decision “to pre-emptively strengthen liquidity” by borrowing funds from the Swiss central bank under a loan facility and a short-term liquidity facility.
The plan will involve cash tender offers for 10 US dollar-denominated senior debt securities of up to $2.5 billion and four euro-denominated senior debt securities of up to €500 million. Offer will expire on March 22nd.
Chief executive Ulrich Körner said the steps “represent decisive action to strengthen Credit Suisse as we continue our strategic transformation”. Körner’s restructuring included selling part of its investment bank Credit Suisse and cutting thousands of jobs.
“The team and I decided to move forward quickly to deliver a simpler and more focused bank built around the needs of our clients,” added Körner, who was appointed chief executive in July.
The move is the latest effort by Credit Suisse to regain investor confidence after a series of scandals and setbacks rocked the Swiss bank and sent its share price plummeting.
Shares in Credit Suisse closed down 24.2 per cent on Wednesday, pushing its market value below SFr7bn. Shares in the bank, which raised SFr4bn of capital just a few months ago, are down 39 percent this year and 85 percent over the past two years.
Credit Suisse’s sell-off on Wednesday weighed on bank stocks in Europe and the US, which were also reeling from the closure of SVB, the biggest US bank failure since 2008. The implosion came after long-invested Treasury bonds. in falling in value.
Investors said the problem of Credit Suisse is a reminder that European banks also have large bond portfolios, the value of which has been hammered by rising interest rates.
For Credit Suisse, the latest drop in share prices added to a challenging week. On Tuesday, the bank said that its auditor, PwC, had identified “material weaknesses” in its financial reporting controls, which led to the suspension of the publication of its annual report.
On Wednesday, Saudi National Bank chairman Ammar Alkhudairy said “the answer is absolutely no” when asked if the SNB would be open to providing capital to Credit Suisse. The SNB bought a 10 percent stake in Credit Suisse last year.
He said owning a large part of the bank would lead to unwanted regulatory requirements, although he added that he supported Credit Suisse’s restructuring plan and did not think it needed more capital.