Credit Suisse shares hit record low on outflow claims probe

Credit Suisse Group fell to an intraday record low on a report that the chairman is facing a probe over comments he made that the firm had put a stop to huge client outflows after a run of share declines.

Swiss financial markets regulator Finma is seeking to establish whether the comments from bank representatives including chairman Axel Lehmann were misleading, according to a Reuters report. In a Bloomberg TV interview in early December, Mr Lehmann had said that outflows had “basically stopped after it had disclosed the loss of 84 billion Swiss francs (€85 billion) of client assets in November. By the end of the quarter, that figure had risen to 110.5 billion Swiss francs.

The remarks were made before the close of a crucial $4 billion (€3.76 billion) capital raise and helped arrest a sharp decline in the share price. While total quarterly withdrawals exceeded Credit Suisse’s initial disclosure, their exact timing after November is unclear.

The stock slid as much as 9 per cent and was down about 7 per cent as of 12:07pm local time on Tuesday. The shares have declined about 6.5 per cent this year.

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Chief executive Ulrich Koerner’s pledge to stem declines and return the bank to profitability by 2024 hinges on a massive outreach programme to woo back client cash. It’s also carving out the volatile investment bank, selling capital-intensive businesses and slashing 9,000 jobs to help cut costs.

This month, Credit Suisse, where former Bank of Ireland CEO Francesca McDonagh was appointed as chief operating officer last year, reported some progress in the steps needed to execute the plan, including a path to an initial public offering or spin-off of the new CS First Boston, and showed tentative signs that customer confidence was returning.

Finma and Credit Suisse declined to comment on the report.

“We’d think Finma would not be looking to further destabilise the bank by going after him aggressively,” Adam Terelak, an equity research analyst at Mediobanca, said. “This just adds another headache for the bank that is struggling to stabilise itself post record client outflows.”

In cases of market manipulation, Switzerland’s financial regulator can invoke sanctions including banning individuals from working in certain industries. However, it does not have the power to issue fines and cannot seize evidence or search premises.

This isn’t the first time a top Credit Suisse executive has come under scrutiny in recent years. Former Chairman Antonio Horta-Osorio was forced to step down after breaching Covid-19 quarantine rules and ex-CEO Tidjane Thiam resigned over a scandal that involved the bank spying on a former executive.

The bank is now operating with an entirely new executive board and more than half of its board of directors are new within the past two years.

Around the same time as the outflows in the fall, Credit Suisse was marketing a rights offering to raise capital at an offer price of 2.52 Swiss francs. The outflows announcement sent the stock close to that level, increasing the risk that underwriting banks would be left holding the shares, though ultimately the rights offering was successful.

The uncertainty around the outflows, though, drove the Swiss bank to one of its longest run of share losses ever.

Then, on December 2nd, Lehmann, in a Bloomberg TV interview, assuaged investor angst by saying client withdrawals had effectively ceased and that the bank’s liquidity had returned to comfortable levels.

The remarks were made just days before the close of the capital raise and triggered a more than 10 per cent surge in the share price. – Bloomberg