Credit Suisse stock
hit a another record low on Thursday, as investors remained wary of the bank’s prospects despite a recent 4 billion Swiss franc ($4.2 billion) capital injection.
Shares in the embattled lender dropped below CHF2.7 for the first time, down nearly 85% over the past five years. The bank’s 5-year credit default swap spreads, which measure expectations of possible default, at one point jumped to fresh highs near 450 basis points, up from around 50 basis points a year ago.
The embattled lender last month revealed it would likely deliver a fourth quarter loss of up to CHF1.5 billion, its fifth consecutive quarter in the red, after a slowdown in investment banking earnings and as wealthy clients withdrew nearly 10% of assets, or some CHF64 billion, since the beginning of October.
Those outflows left Credit Suisse to say it had experienced a drop in liquidity that meant it had “fallen below certain legal entity-level regulatory requirements”.
The bank, Switzerland’s second-biggest after UBS, has endured a string of difficulties in recent years, including taking big financial and reputational hits from exposure to the collapses of business bank Greensill Capital and hedge fund Archegos.
As part of a stabilization plan, Credit Suisse management last month said it would spin off its investment bank and raise CHF4 billion in capital. This included a cash call aimed at raising CHF2.24 billion and a CHF1.76 billion share placement in which Saudi National Bank took a 9.9% stake.
However, the recent share price decline has left them trading less than 10% above the CHF2.52 offer price in the rights issue, which in turn has caused the price of the rights to subscribe to fall sharply, at one point off 50% on Thursday, according to Reuters.
“The share price is… above the offer price of CHF 2.52 for their CHF 2.2bn rights offering, which is also the ‘hard underwriting’ price for the consortium of 19 banks. If CSG were to keep trading above CHF 2.52 till the last day of rights trading on Dec 6, 2022, we can assume at that point the capital raise was most likely a success,” JP Morgan told Reuters.