Credit Suisse shares tumble more than 20%, leading a plunge in European bank stocks
- Credit Suisse shares fell 21% Wednesday after its Saudi backers ruled out more investment.
- The embattled Swiss bank revealed "material weaknesses" in its reporting on Tuesday.
Credit Suisse shares tumbled more than 20% in early trading on Wednesday after its biggest backer ruled out investing any more into the troubled Swiss bank.
"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 a Bloomberg interview, responding to whether the Gulf lender would dole out more money.
Credit Suisse's stock was down 16.33% to $2.09 Wednesday after sliding 21.91% to $1.96 in pre-market trading in US-listed shares.
Meanwhile, in Zurich, its stock fell 15.71% to $1.88 after dropping 19% to $1.79 earlier in the session, marking a new record low on Switzerland's stock exchange. The bank's stock is down about 24% since the start of the year.
The Saudi lender became the largest shareholder in Credit Suisse after it replaced Harris Associates earlier in March. But acquiring any additional stake in the company is not an option for them, Al Khudairy said.
"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," he added.
Credit Suisse's troubles have been growing of late. It published its annual report on Tuesday after delaying it for a few days because the Securities and Exchange Commission questioned some changes the bank had made related to cash flow statements from three years ago, adding in its annual report that it identified "material weaknesses" in its financial reporting.
In a further sign of turmoil, the cost of insuring bonds of Credit Suisse against a default in the near term has surged. The five-year credit default swaps on Credit Suisse debt extended to 533 basis points from 549 basis points at last close, per Reuters.
On the news, shares in the pan-European Stoxx 600 index also tumbled in Europe, leading to trading halts, according to CNBC.
The global banking sector has been rocked in recent days by the stunning collapse of Silicon Valley Bank, which set off a slide in regional US bank stocks. Investors have been fretting over whether SVB's downfall will trigger another 2008-style crisis.