Credit Suisse collapses when Controllers claim run-of-funds stabilization is bogus
A few weeks ago, Credit Suisse shares suffered one of the biggest falls ever after:
i) warned of continued losses for 2023 and beyond, e
ii) revealed that it suffered a record outflow of 110.5 billion Swiss francs in the quarter, an amount that analysts at KBW called "pretty staggering".
And, as we noted at the time, this was quite problematic because in late 2022, soon after the news of the bank's record outflows broke, the company's management team and chairman Axel Lehmann said in various media interviews that the outflows had stopped – hoping this would ease the pressure on the bank and contain the outflows in the meantime – when in fact the rush on the bank had only just begun.
Well, two months later, regulators have stepped in and are looking into the unfoundedly optimistic comments the chairman – and other Credit Suisse representatives – have made about the health of its finances, according to Reuters.
As a reminder, Lehmann told the Financial Times in an interview streamed online on Dec. 1 that after October's strong outflows, they had "completely flattened out" and "partially reversed." The next day, he told Bloomberg Television that the outflows had "basically stopped." On Dec. 2, the bank's stock jumped 9.3% on Lehman's comments, only to tumble again after the company revealed the severity of the outflows.
The outflows had not only not stopped, they were accelerating. Now, according to Reuters sources, the regulator is assessing whether Lehmann's statements were potentially misleading.
In response to a question about the distribution of withdrawals over the period, Chief Executive Officer Ulrich Koerner told analysts that more than 85% of outflows in the recent quarter occurred in October and November, according to the transcript of the call.
This led Citigroup analysts to conclude in a note to clients that management did indeed indicate that 15% of the outflows occurred in December, which was after Lehmann's dovish comments. The FINMA scrutiny adds to the challenges faced by Credit Suisse, which has been rocked by scandals in recent years. In early October, a social media storm sparked by unsubstantiated news about the bank's financial health prompted wealthier customers to move their deposits elsewhere. On that occasion, the bank declared its intention to proceed with the restructuring and to remain close to its customers.
Responding to a request for comment from Reuters on its Feb. 9 results, the FINMA said in a statement that while Credit Suisse's cash buffers have had a stabilizing effect, the regulator "monitors banks very closely." close in situations like this,” referring to the outflows, which “were actually significant” in the fourth quarter. He did not provide further details.
News of the Swiss lender's latest troubles, now reduced to a mere shell, sent its shares tumbling 6.4% to a new all-time low of 2.52 Swiss francs before partially recouping losses.
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Credit Suisse article collapses when Controllers claim fund flight stabilization is false comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/credit-suisse-crolla-quando-i-controllori-affermano-che-la-stabilizzazione-della-fuga-del-fondi-e-falsa/ on Wed, 22 Feb 2023 08:00:09 +0000.