Credit Suisse Shares on Worst Run Since 1989 as Losses Deepen

(Bloomberg) — Credit Suisse Group AG slipped a 13th straight session, marking its longest run of losses ever, as the troubled Swiss bank’s capital-raising compounds the fallout from years of scandals and mismanagement.

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The shares fell as much as 5.5% Thursday to a record low of 2.67 francs. They’ve dropped about 21% since Nov. 23, when the lender reported massive outflows at its key wealth-management business and warned it could post another big loss in the fourth-quarter, of as much as 1.5 billion Swiss francs ($1.6 billion).

Credit Suisse’s overhaul, including job cuts and the carve-out of the investment banking business, has met with skepticism from some analysts and investors concerned about the complexity of the restructuring. On top of that, the ongoing $4 billion capital increase will dilute existing investors’ holdings, adding further pain after a year of huge losses.

In the ongoing 13-day rout, Credit Suisse has lost about 2.7 billion francs in market value and is down about 66% this year.

The “material capital raise” and lack of details on a “very complex” investment banking restructuring has been weighing on Credit Suisse’s shares, JPMorgan Chase & Co. analyst Kian Abouhossein wrote in a note on Thursday. He also cut earnings estimates by 45% for 2023, citing hefty outflows in the bank’s wealth management business.

Talks about a possible takeover of Credit Suisse are likely to pick-up if wealth management outflows continue and might also lead the bank to consider an initial public offering of its Swiss business, with a valuation of 14 billion francs, Abouhossein added.

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While also caused by technical factors related to the ongoing capital raise, the declines are a further worry for the bank as it seeks to stabilize its business after one of the most difficult years in its recent history.

The cost to insure Credit Suisse’s debt against default eased about 13 basis points on Thursday, to 433 basis points, according to ICE Data Services. Still, it remains elevated, hovering near all-time highs.

The Swiss bank’s long-term credit rating was cut last month to BBB- from BBB, with a stable outlook. That’s just above the BB “speculative” grade more commonly known as junk. The US ratings firm echoed analysts in pointing to “material execution risks amid a deteriorating and volatile economic and market environment.” It also signaled that some details around asset sales remain “unclear.”

The cash call via a rights issue started Monday and the rights will trade on the SIX Swiss Exchange until Dec. 6. However, as the price of the rights has tumbled to less than 0.10 francs, from about 0.17 francs, that is creating a fresh source of technical pressure for existing Credit Suisse stock.

That pressure may not ease once the new shares start to trade on Dec. 9.

–With assistance from Jan-Patrick Barnert.

(Updates with details throughout)

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