Credit Suisse to borrow up to $54B from Swiss central bank

Credit Suisse Group AG arranged to borrow as much as 50 billion francs ($54 billion) from the Swiss National Bank and offered to repurchase debt in a bid to reverse a collapse in market confidence.

The troubled lender will borrow from a liquidity facility and is making a tender offer to buy back up to three billion francs of dollar- and euro-denominated debt, according to a statement. 

The moves—unprecedented at a major Swiss lender since the 2008 financial crisis—are the biggest yet to shore up finances at Credit Suisse. The bank’s shares slumped by as much as 31% on Wednesday in Zurich trading, and its bonds fell to levels that signal deep financial distress, as persistent doubts over the scandal-ridden lender combined with a global selloff in banking stocks. 

The government, central bank and financial regulator Finma have been discussing ways to stabilize the bank after a tumultuous day sparked by comments from the firm’s largest investor, Bloomberg reported earlier.

“These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation,” Chief Executive Officer Ulrich Koerner said in the statement. “My team and I are resolved to move forward rapidly to deliver a simpler and more focused bank built around client needs.”

Debt Repurchase

Credit Suisse announced at least its second debt repurchase in just the past six months as it looks to restore investor confidence. It offered to buy back about $3 billion of its debt in October last year, saying at that time it wanted to “take advantage of market conditions to repurchase debt at attractive prices.”

The latest tender offer applies to ten senior debt securities for up to $2.5 billion, as well as four euro-denominated senior debt securities for as much as 500 million euros.

Switzerland’s second-largest lender, which traces its roots back to 1856, has been battered over the last several years by a series of blowups, scandals, leadership overhaul and legal issues. The company’s 7.3 billion franc loss last year wiped out the previous decade’s worth of profits, and the bank’s second strategy pivot in as many years has so far failed to win over investors or halt client outflows. 

Management Comments

CEO Koerner on Tuesday asked for patience and said the bank’s financial position is sound. He pointed to the firm’s liquidity coverage ratio, which indicates the bank can handle more than a month’s worth of outflows in a period of stress. Chairman Axel Lehmann had said at a conference on Wednesday that government assistance “isn’t a topic” and the firm’s efforts to return to profitability aren’t comparable to the severe liquidity issues hitting smaller lenders in the US.

Bloomberg reported earlier that the government, central bank and Finma were in contact to discuss ways to stabilize Credit Suisse. Ideas floated—beyond the public show of support—included a separation of the bank’s Swiss unit and a long-shot orchestrated tie-up with larger Swiss rival UBS Group AG, people familiar with the matter said, cautioning that it’s unclear which, if any, of these steps would actually be executed.

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