Bank / Credit Union

Credit Suisse hits record low stock prices following scandals

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October 4, 2022

Credit Suisse took a major hit to its stock price Monday as it hit a record low of $3.64. The drop was due to market concerns over the bank, particularly after Ulrich Koerner took over as CEO after a series of scandals, according to a report by CNBC.

According to another CNBC report, the scandals include:

• The bank taking significant losses with the fall of U.S. hedge fund Archegos Capital, which raised questions about its risk management.
• A spying scandal with former CEO Tidjane Thiam.
• Switzerland's Federal Criminal Court found the bank guilty of failing to prevent money laundering by an alleged Bulgarian cocaine operation from 2004 to 2008.
• The bank posted a loss for the second quarter due to the war in Ukraine and monetary policy.

Despite these concerns, Koerner remains optimistic as the bank undergoes a strategic review.

"I know it's not easy to remain focused amid the many stories you read in the media — in particular, given the many factually inaccurate statements being made. That said, I trust that you are not confusing our day-to-day stock price performance with the strong capital base and liquidity position of the bank," Koerner told the news outlet.

Currently, Moody's, S&P and Fitch have a negative outlook on the bank, and some have raised concerns this could lead to a similar situation in 2008 where customers were cautious with dealing with financial institutions.

However, Johann Scholtz, equity analyst at DBRS Morningstar, is doubtful it will lead to that same situation, due in part to the bank's better equity capital levels.

"The other thing that is much different compared to the Great Financial Crisis — and that's not just the case only for Credit Suisse — is that not only are their equity capital levels much higher, you've also seen a complete overhaul of the structure of banking capitalization, something like buy-inable debt that's come along, also improves the outlook for the solvency of banks," Scholtz told CNBC.