By: Ken Chase.
Swiss financial giant Credit Suisse has been in the media and financial market spotlight in recent weeks, and for good reason. The troubled bank’s stability has been a near constant source of scrutiny from investors and market watchers alike, thanks to a series of scandals and other negative news. To fully grasp where things stand with Credit Suisse now, it is helpful to review the bank’s recent troubled history.
Outside observers have noted that the bank’s troubles have been going on since at least 2021. That year saw Credit Suisse suffer losses of about $4.7 billion when the bank was one of several financial firms defrauded by the Archegos Capital hedge fund. In the aftermath of that scandal, and independent audit determined that the bank had failed in its duty to effectively manage its risk. Ultimately, two of the firm’s executives were removed from office due to the scandal.
Another major scandal erupted in February of this year when information about 30,000 of the bank’s clients was leaked to the public. That leak revealed that more than $100 billion of the bank’s customer assets belonged to people who profited from crimes ranging from corruption and money laundering to drug trafficking, torture, and other offenses.
The troubles continued over the summer, with a regular stream of news about the bank’s efforts to recover and transform its operations. In early September, there were reports that Credit Suisse planned to cut 5,000 jobs, as its share prices had fallen 40% over the course of the first eight months of the year. Later in the month, the bank revealed plans to sell assets as part of an effort to scale back its investment operations and transform its business into a “capital-light, advisory-led” company.
The company’s stock crashed again on October 3, on the heels of CEO Ulrich Koerner’s attempt to reassure investors that the company had a 100-day turnaround strategy. In the aftermath of that share price decline, Fortune reported that the stock price had lost about 60 percent of its value in 2022.
Credit Suisse then announced a $3 billion bond buyback offer as part of an effort to reassure investors who had expressed doubts about the firm’s liquidity. That prompted an immediate rise in the value of its stock prices, which rallied by 7% at the end of last week.
However, investor and analyst questions still remain, as the markets await the company’s restructuring plan’s unveiling on October 27.