Credit Suisse shares surged 32% in opening trade, rallying as the Swiss banking giant said it will tap its central bank for 50 billion francs ($54 billion) and launching an offer to buy beaten-up debt.
While the stock
came off those highs, it demonstrated that the action helped stave off some of the pressures building around the bank, which has lost money for five consecutive quarters.
Other European bank shares
rose as well, including those of arch-rival UBS
and Julius Baer
Credit Suisse has insisted that it is not in the same boat as fallen SVB Financial, and in particular does not have the same duration mismatch.
It said it’s launching a tender to buy about 3 billion francs of its own debt.
“The transactions are consistent with our proactive approach to managing our overall liability composition and optimizing interest expense and allow us to take advantage of current trading levels to repurchase debt at attractive prices,” said the bank.
Its CEO, Ulrich Koerner, said the moves “demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders.”
One question is whether the action will be enough. “It may the coming days will show whether this is enough to calm nervous markets, in Switzerland and beyond. More support and transparency, for example an ad-hoc stress test, may be necessary,” said analysts at Citi.
“Even if these actions are ultimately successful, it may take time for the results to be visible and to restore the confidence of all stakeholders,” added analysts at Barclays, who see the bank losing 4.5 billion francs this year and 2.9 billion francs next year.
Credit Suisse shares had plunged on Wednesday when the chairman of its leading shareholder, Saudi National Bank, told Bloomberg News it wouldn’t buy any more stock.
Chairman Ammar Al Khudairy of Saudi National Bank reiterated to CNBC on Thursday that it did not want to exceed an ownership threshold of 9.9%, but also said the pressure Credit Suisse was unwarranted.
“It’s panic, a little bit of panic. I believe completely unwarranted, whether it be for Credit Suisse or for the entire market,” he said. He added there’s been no talks between the bank and Credit Suisse since October.
A key subtlety in the Saudi comments: saying the Middle East bank doesn’t want to exceed a 9.9% level of ownership implies it could be willing to buy more shares in the event Credit Suisse launches another share sale that would be dilutive to all holders.