Saudi lender comment triggers new Credit Suisse stock slump

Shares in Switzerland's second largest bank tumbled to new record lows after its largest investor said it could not provide more financial assistance to the bank. © Keystone / Ennio Leanza

The main shareholder of Credit Suisse has ruled out providing more financial assistance to the ailing Swiss bank, prompting its share prices to drop to new record lows.

Saudi Arabia’s National Bank, which acquired 9.88% of Credit Suisse shares last year, said it would not buy more shares on regulatory grounds.

“We cannot because we would go above 10%. It’s a regulatory issue,” Saudi National Bank chairman, Ammar Al Khudairy said on the sidelines of a conference in the Saudi capital, Riyadh, on Wednesday.

His comments came as the price of Credit Suisse shares for the first time dropped below CHF2 ($2.18).

The shares of Switzerland’s second biggest bank slid as much as 30% in trading on Wednesday, sparking a broader sell-off in European and United States stocks.

Credit Suisse shares recovered slightly later in the day and closed at CHF1.697 on the Zurich stock exchange.

The European Central Bank reportedly contacted lenders to ask about financial exposures to Credit Suisse , while the United States Treasury said it was monitoring the situation closely.

The slump also prompted action by politicians, notably in France.

Nerves

In a bid to calm nerves, the Credit Suisse chief executive, Ulrich Körner, said the bank’s liquidity base remained strong and was well above all regulatory requirements.

The bank asked the Swiss National Bank (SNB) and the Swiss financial regulator for a public show of support, the Reuters news agency reported.

However, the SNB declined to comment.

The Credit Suisse chairman, Axel Lehmann, is quoted as saying government assistance “isn’t a topic” for the bank as it seeks to shore up confidence among clients, investors and regulators after a series of missteps.

Saudi optimism

The chairman of Saudi Arabia’s National Bank said earlier that the Saudi investment objective is not dependent on time.

Al Khudairy said the value realisation of that investment will unfold as the Swiss bank proves they are doing the turnaround.

“We are happy with the plan, the transformation plan that they have put forward. It is a very strong bank,” he said.

“I don’t think they will need extra money; if you look at their ratios, they’re fine. And they operate under a strong regulatory regime in Switzerland and in other countries,” he told the Reuters news agency.

Credit Suisse is battling to recover from a string of scandals that have undermined the confidence of investors and clients.