Banking Nightmare Continues with Credit Suisse

Another day, another banking crisis.

This time, it’s the Swiss investment bank Credit Suisse (NYSE:CS) — the problem child of the financial services sector.

Since the ‘07/08 financial crisis, the company has been plagued by scandals, management changes and constant strategy changes.

Now, it’s in the middle of another 3-year turnaround plan — which includes cutting costs and separating its investment banking division. But that’s only if it can survive that long.

Warning: String of bad news incoming…

Then, rumors began spreading last October about the bank’s financial health — leading to $100B+ in withdrawals in the following three months.

Earlier this month, the bank’s ex-largest shareholder, Harris Associates, sold its entire stake.

The bank’s situation turned significantly worse this week:

• CS confirmed an $8B loss in its 2022 annual report — more than the previous 10 years’ profits combined — expecting another “substantial loss” in 2023.
• The bank’s auditors found “material weaknesses” in reporting processes for the past two years — which are still being investigated.
• Its top shareholder — Saudi National Bank — refused to invest more money, citing regulatory reasons.

These problems sent its stock down 31% in the past month to its lowest point ever.

CEO Ulrich Körner tried reassuring investors by saying: The bank is fine with “strong capital ratios” and a “strong balance sheet” — that it has enough capital to handle over a month of heavy outflows in a period of stress.

Yesterday, the Swiss National Bank and Swiss regulator Finma said it would provide support to the bank if needed.

The most important question for investors: Could Credit Suisse’s collapse trigger a global financial crisis? More below.