Credit Suisse warns of $1.6 billion loss after clients pull money
Credit Suisse issues fuel jitters of 2008 meltdown
Former FDIC Chair Sheila Bair discusses Credit Suisse’s issues as the U.S. faces economic challenges and how the Fed will keep financial systems ‘stable.’
Credit Suisse Group AG warned it would lose around $1.6 billion in the fourth quarter after customers pulled their investments and deposits over concerns about the bank’s financial health.
Switzerland’s No. 2 bank by assets said outflows were around 6% of its total $1.47 trillion assets, or around $88.3 billion, between Sept. 30 and Nov. 11. Customers in its wealth-management arm – its main business serving the world’s rich – removed $66.7 billion from the bank. Credit Suisse in late October said a social-media frenzy around its health was causing large outflows.
The fast pace of withdrawals meant the bank’s liquidity fell below some local-level requirements, the bank said. It said it maintained its required group-level liquidity and funding ratios at all times. Banks must keep enough liquid assets on hand to meet expected cash outflows in a 30-day period, under post-financial-crisis-era rules.
CREDIT SUISSE CUTTING 2,700 JOBS IN FOURTH QUARTER, EXPECTS MORE BY 2025
|CS||CREDIT SUISSE GROUP AG||3.83||-0.25||-6.12%|
Credit Suisse’s stock fell 5% Wednesday. If sustained, the decline would take the price below its lowest closing level of Sept. 29, according to FactSet. The shares are down nearly 60% this year.
The cost to insure the bank’s debt against default rose Wednesday.
The warning comes at a precarious time for the bank, which weeks ago launched a sweeping overhaul of its operations. Credit Suisse received shareholder approval Wednesday on a plan to raise more than $4 billion in new stock. It is in the process of selling a large group within its investment bank to free up capital, as part of its recovery effort.
The new stock is being sold to new and existing investors. Saudi National Bank said it would take a stake of up to 9.9% as a new shareholder. Some analysts are concerned the new capital raising may not be enough if Credit Suisse’s revamp doesn’t go as planned. The bank’s capital needs depend on selling and exiting some businesses, and on how its continuing businesses perform.