Will the “too big to fail” myth be busted? Credit Suisse is the second largest bank in Switzerland and one of many large banks in the West. On March 14, Credit Suisse Group admitted in its annual report that the internal control reported for the 2022 and 2021 fiscal years was invalid, and there were “major defects” in the entity’s statements. As soon as the news came out, the bank’s stock price plummeted immediately, hitting new lows several times in just one month. cnbc. The bank’s shares were down 24% through Wednesday’s close , the biggest one-day sell-off. Not only that, its five-year CDS hit a record high of 476 basis points, indicating that the market’s expectations of the bank’s default continued to ferment.
Credit Suisse has been under fire over the years for its various scandals (recently high profile money laundering cases, cnbc、Archegos Greensill incidents, and more) legacy risks and compliance failures the guardian . This has greatly reduced investor confidence in the bank, with billions of dollars withdrawn from the bank last year. Coupled with the negative impact of environmental factors, Credit Suisse recorded the largest annual loss since the 2008 financial crisis, and its stock price has fallen by nearly 70% in the past 12 months.
Credit Suisse still expects to post big losses this year, but management is restructuring, including cutting about 8% of its workforce and drawing on its liquidity buffer. Recently, the largest shareholder of Credit Suisse, the National Bank of Saudi Arabia, stated that due to regulatory issues, it could not provide more funds to Credit Suisse Bank as it already owned more than 10% of the equity of the bank. Immediately afterwards, during today’s Asian trading session, it was reported that the Swiss National Bank will provide up to 50 billion Swiss francs of liquidity to Credit Suisse Bank to help support the bank’s core business and customers. In addition, the bank will conduct a public tender for debt securities and announce the repurchase of certain OpCo senior debt securities for CHF 3 billion in cash.
Credit Suisse Bank was once listed as a systemically important bank by the US Financial Stability Board, which represents the bank’s status in the financial circle and indirectly shows that it is under the pressure of “too big to fail”. If unfortunately it goes bankrupt, it will be a fatal blow to the global financial system, and the Eurozone economy may also face a huge impact. The bank trades at 2.0900 CHF today up +23% from yesterday’s record low close 1.697 CHF.
Technical Analysis：
EU50.F pulled back after encountering resistance at 4326 last week . The index is now closing above 4068 (FR 23.6% stretched from October 2022 lows to March this year highs) support and 100-day SMA following positive news from the government on Credit Suisse’s liquidity provision. In addition, the 4-hour chart shows short-term support at 4088. Should the share price break below these two levels, the selling momentum could extend further to 4014. Short-term resistance is seen at 4133. A break above this level will bring the bulls to test 4170 and then 4205.
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Larince Zhang
Market Analyst
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