Credit Suisse Group AG managed to borrow up to 50 billion francs ($54 billion) from the Swiss National Bank and offered to buy back the debt in a bid to reverse the collapse in market confidence.
The troubled lender will borrow from the liquidity facility and make a tender offer to buy back up to three billion francs of dollar- and euro-denominated debt, according to a statement.
The move – unprecedented at a major Swiss lender since the 2008 financial crisis – is the largest ever to support financial services at Credit Suisse. The bank’s shares fell as much as 31% on Wednesday in Zurich trading, and its bonds fell to levels signaling a deepening financial crisis, as lingering doubts about the scandal-plagued lender combined with a global sell-off in banking stocks.
The government, the central bank and financial regulator Finma have been discussing ways to stabilize the bank after a tumultuous day over comments from the company’s biggest investor, Bloomberg reported earlier.
“These steps represent decisive action to strengthen Credit Suisse as we continue our strategic transformation,” Chief Executive Ulrich Koerner said in the statement. “The team and I decided to move forward quickly to deliver a more convenient and focused bank built on the needs of our clients.”
Repurchase debt
Credit Suisse announced at least the second debt buyback in the past six months as it looks to restore investor confidence. It offers to buy back about $3 billion in debt in October last year, saying at the time it wanted to “take advantage of the market situation to repurchase debt at attractive prices.”
The latest tender offer applies to ten senior debt securities of up to $2.5 billion, as well as four euro-denominated senior debt securities of up to 500 million euros.
Switzerland’s second-largest lender, which dates back to 1856, has been battered over the past several years by a series of explosions, scandals, leadership reshuffles and legal problems. The company’s 7.3 billion franc loss last year wiped out the previous decade’s profits, and the bank’s second strategic pivot in as many years has so far failed to win over investors or stem client outflows.
Management Comments
CEO Koerner on Tuesday asked for patience and said the bank’s financial position is good. He pointed to the company’s liquidity coverage ratio, which shows banks can handle outflows for more than a month during periods of stress. Chairman Axel Lehmann has said at a conference on Wednesday that government assistance is “not a topic” and that the firm’s efforts to return to profitability are not comparable to the severe liquidity problems affecting small creditors in the US.
Bloomberg reported earlier that the government, the central bank and Finma are in contact to discuss ways to stabilize Credit Suisse. Ideas floated—beyond the public show of support—include a split of the bank’s Swiss unit and a long-arranged tie-up with larger Swiss rival UBS Group AG, people familiar with the matter said, cautioning that it was unclear if anything would happen. , these steps will be taken.