Economic Insider

Credit Suisse goes bankrupt to a tune of £55bn

Image Commercially Licensed From: DepositPhotos
Image Commercially Licensed From: DepositPhotos

Credit Suisse has provided information regarding the size of the bank run that resulted in the bank’s state-backed bailout in March.

In the first three months of the year, the bank lost 61.2 billion Swiss francs (£55.2 billion; $68.6 billion), according to the Swiss banking giant.

It took place at the same time that the lender reportedly issued its final set of financial data.

It is about to close on its forced sale to rival Swiss bank UBS.

The main wealth management division of Credit Suisse reportedly managed 502.5 billion francs at the end of March, which is around 29% less than it did during the same time period in 2017.

Clients of Credit Suisse began withdrawing funds after the bank became embroiled in the market upheaval that followed the failures of Silicon Valley Bank and Signature Bank in the United States in March.

Authorities in Switzerland put up a rescue package for Credit Suisse. It contained over 200 billion Swiss francs in financial guarantees and saw UBS agree to buy Credit Suisse.

Credit Suisse has been losing money and dealt with many issues in recent years, including money laundering charges.

It recorded a 7.3 billion Swiss francs loss in 2022, its worst year since the 2008 financial crisis, and warned it would not be profitable until 2024.

Frances Coppola, an independent banking expert, told the BBC’s Today program that Credit Suisse has also had billions of dollars taken in the final three months of 2022.

“Of course, this quarter’s [withdrawals] added to that.” And banks cannot withstand such outflows, no matter how big they are.”

According to Shanti Kelemen, a chief investment officer of M&G Wealth Investments, the outflows were “going to be a big number” given the bank’s size.

“If anything, we have confirmation of what UBS has purchased today.”

Silicon Valley Bank and Signature Bank in the United States failed as the value of their assets plummeted due to rising interest rates.

Banking stocks plunged sharply worldwide on fears that other lenders would experience similar issues, and investors hurried to withdraw their funds from the already struggling Credit Suisse.

Concerns about other institutions have subsided since then, but Ms. Coppola believes others may still face challenges.

Prosecutors in Switzerland have investigated the abrupt purchase of Credit Suisse, the country’s second-largest bank.

The agreement has enraged taxpayers and both banks’ shareholders, who were denied a vote on the takeover. Some say that it has also harmed Switzerland’s global standing as a financial center.

Credit Suisse was valued at $3.15 billion (£2.6 billion) when the transaction was announced, whereas it was valued at almost $8 billion on the Friday before the agreed-upon settlement.

Credit Suisse shareholders expresses disappointment

Credit Suisse shareholders have notified the company that they feel “failed” and “cheated” after the failing bank was rescued by its long-time rival UBS.

On Tuesday, the 167-year-old Swiss bank addressed investors for the first time since the agreement was reached and for the final time as an independent corporation.

Axel Lehmann, chairman of Credit Suisse, expressed “deep regret.”

However, one investor complained to the bank that stockholders had “everything stolen from them.”

UBS rescued Credit Suisse in a transaction mediated by authorities last month after turbulence in the US banking sector sent the Swiss lender’s shares plunging.

The bank had been in trouble for several years due to scandals, compliance issues, and poor financial decisions.

Mr. Lehmann told investors at the Annual General Meeting that management had the plan to turn things around but that it had been “thwarted” by anxieties sparked by the failure of Silicon Valley Bank in the United States.

However, one shareholder speculated that the board would have been crucified in medieval times.

Another person held out a sack of empty walnut shells, claiming they were the same price as one Credit Suisse share.

Shareholders at both Credit Suisse and UBS, which will convene an investor meeting on Wednesday, have been denied a vote on the takeover due to the Swiss government’s extraordinary steps to expedite the deal.

According to Mr. Lehmann, the only other choice would have been bankruptcy.

Imogen Foulkes, BBC Geneva correspondent, provides an analysis.

Credit Suisse executives were well aware that they would have to eat humble pie at this meeting, yet despite multiple apologies, shareholders remain enraged.

It is usual for middle-class Swiss citizens, particularly older people, to invest a few shares to supplement their pensions. So what have people traditionally thought to be safe? The two largest banks in Switzerland. Credit Suisse shares are now worth less than 10% of what they were two years ago.

Speaking on behalf of a group of shareholders, one guy accused Credit Suisse management of “greed and incompetence.” At the same time, another pointed to his red tie, claiming it represented the “red card” Credit Suisse deserved.

Read Also: US Government says money in SVB is safe

Others vented their rage at the Swiss government, which ordered UBS to complete the deal over a weekend while the markets were closed. According to one shareholder, some of us spend more time selecting our devices.

The stockholders’ only option is to vent their rage; the agreement with UBS has already been completed. CEO Ulrich Korner apologized once more, saying there was a little alternative; it was either the agreement with UBS or insolvency, which he said would have been terrible not just for Switzerland but the entire world economy.

Reference: Credit Suisse investors angrily confront bank as chairman says sorry