Credit Suisse shares declined by 24 percent

Shares of Credit Suisse Group AG dropped drastically on Wednesday, the most significant single-day decrease in history after the bank’s most important backer, Saudi National Bank, declared that it was not able to increase its 10 percent ownership due to regulatory obstacles.

The Saudi National Bank’s Chairperson, Ammar Al Khudairy, told Reuters that they cannot go higher than 10 percent due to a regulatory issue. Nonetheless, he expressed contentment with Credit Suisse’s transformation scheme and presumed that extra funds would not be required.

The Saudi Arabian Sovereign Wealth Fund holds a 37% stake in the Saudi National Bank, which purchased an interest in Credit Suisse of 9.9% for 1.4 billion francs in the later part of last year. Unfortunately, that stake has devalued in the past few months to the tune of 500 million francs.

Trading in Credit Suisse’s shares was suspended multiple times as trading volumes rose and the stock plummeted. By midday in London, the stock had somewhat rebounded, dropping 20.2 percent for the day.

A financial crisis is a great time for professional investors and a horrible time for average ones.

Robert Kiyosaki

According to Antoine Bouvet of ING, the decline of the Swiss bank’s stock and the rise in government bonds is partially due to the current perception of the banking system in Europe resulting from the failure of Silicon Valley Bank. Credit Suisse is undergoing a three-year restructuring in an effort to become profitable again, and its five-year CDS spreads have hit an all-time high due to the recent negativity.

Since 8 March, the bank index in Europe has seen a substantial drop in value, with over 120 billion euros ($127.08 billion) gone. At 1154 GMT, the index was down 6.4 percent, which caused European stocks to drop 2.4 percent. This is the worst week-on-week decrease since Russia attacked Ukraine in February. According to Richard McGuire, head of rates strategy at Rabobank in London, the headlines concerning Credit Suisse have been a major factor in the market’s anxiety.

Francois Lavier, head of financial debt strategies at Lazard Freres Gestion, stated that markets are highly responsive to unfavorable reports following the unexpected disappearance of an American bank and the subsequent spread of trouble among other US regional banks. He further noted that, in a situation where sentiment is already shaky, not much is needed to weaken it more.

A clear lesson of history is that a ‘sine qua non’ for sustained economic recovery following a financial crisis is a thoroughgoing repair of the financial system.

Janet Yellen

The recent failure of tech-focused lender SVB and New York-based Signature Bank has caused fear of contamination among European bank stocks. Carlo Franchini, head of institutional clients at Banca Ifigest in Milan, voiced his opinion that Credit Suisse’s crisis can be solved, yet the markets are still feeling the impact, with UBS down 6.8%, BNP Paribas and Societe Generale falling by over 11%, Banco de Sabadell dropping 9%, Commerzbank slipping 10%, and Deutsche Bank down 8.4%.

Jerome Legras, head of research at Axiom Alternative Investments, revealed that European banks, particularly the major ones, have a much more effective handling of their interest rate risk, which was the cause of the failure of the three US banks. Additionally, these banks have sufficient liquidity.