Credit Suisse Group AG’s top shareholder, whose stake has lost more than one-third of its value in three months, ruled out investing any more in the troubled Swiss bank as a bigger holding would bring additional regulatory hurdles.
(Bloomberg) — Credit Suisse Group AG’s top shareholder, whose stake has lost more than one-third of its value in three months, ruled out investing any more in the troubled Swiss bank as a bigger holding would bring additional regulatory hurdles.
“The answer is absolutely not, for many reasons outside the simplest reason, which is regulatory and statutory,” Saudi National Bank Chairman Ammar Al Khudairy said in an interview with Bloomberg TV on Wednesday. That was in response to a question on whether the bank was open to further injections if there was another call for additional liquidity.
Credit Suisse fell as much as 23% to a new record low in Zurich, while the cost to insure the bonds against default in the near term approached a level typically signaling serious investor concerns.
The bank is just months into a complex turnaround plan that will see the Swiss firm spin out the investment banking unit while focusing on its key wealth management business. That effort risks being further complicated by market unease across financials after the collapse of multiple US regional banks.
Chief Executive Officer Ulrich Koerner on Tuesday said the bank’s financial position is sound, including a so-called liquidity coverage ratio, which it can draw on to fulfill its obligations, of about 150%. He said that the firm saw inflows on Monday amid the market turmoil and is ahead of schedule on its turnaround plan.
“Nobody is pleased by the share price development, but we manage what we can manage, and this is the execution of our plan,” Koerner said in a Bloomberg Television interview.
Saudi National Bank, which is 37% owned by the kingdom’s sovereign wealth fund, became Credit Suisse’s biggest shareholder late last year after acquiring a 9.9% stake in the Swiss lender for 1.4 billion francs. The stake has lost more than 500 million francs in a matter of months.
Al Khudairy has consistently said that his bank doesn’t want to take its stake beyond the current level. He said in October that he “likes” Credit Suisse’s new leadership and their resolve to execute on its turnaround plan, but any additional equity for the moment is “out of the question.” He said Wednesday that adding to the stake would bring additional regulatory hurdles.
“If we go above 10%, all new rules kick in whether it be by our regulator or the Swiss regulator or the European regulator,” he said. “We’re not inclined to get into a new regulatory regime. I can cite five or six other reasons, but one reason is there is a glass ceiling and we’re not going to entertain going beyond it.”
Al Khudairy also said his bank wasn’t interested in taking a stake in CS First Boston, the investment bank that Credit Suisse is carving out.
While Koerner cited key metrics to demonstrate the bank’s financial strength, concerns about the bank’s future are persisting. The CDS level is about 9 times that of Deutsche Bank and 18 times that of UBS Group AG. The CDS curve is also deeply inverted, meaning that it costs more to protect against an immediate failure at the bank instead of a default further down the line.
Speaking earlier Wednesday, Chairman Axel Lehmann batted away any notion that the bank would need government assistance, saying it “isn’t a topic” for the bank as it seeks to shore up confidence among clients, investors and regulators after a series of missteps.
(Updates share price in third paragraph.)
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