Jakarta, CNBC Indonesia – Swiss investment firm Credit Suisse is experiencing a severe shock. This can be seen by the sharp decline in the financial giant’s stocks and bonds.
Indeed, following this sharp decline, CEO Ulrich Körner sent a reminder to all his employees on Friday (30/9/2022). He tries to convince the staff of the bank’s capital and liquidity position.
Here is the timeline and facts behind the collapse of Credit Suisse stocks and bonds:
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1. History
Credit Suisse’s share price fell another 10% on Monday. It has continued its decline of more than 25% over the past month and is below CHF 4.
Meanwhile, the price of one of its bonds maturing in 2032 on Monday also dropped 7 cents to 70 cents. Meanwhile, bonds maturing in 2033 fell to 53.0 cents.
Financial Times Referring to this continued decline, Credit Suisse executives spent the weekend trying to reassure large clients, trading counterparties and investors about their liquidity and capital position in response to concerns about the flagship bank’s financial health.
They reportedly called clients one by one after news of a sharp rise in Credit Suisse credit default swaps, or insurance premiums in the event of insolvency, which rose sharply on Friday last week, came out, indicating investor concerns about the bank’s health.
2. Losses
The decline in share prices is related to the performance of the company. Reuters reported early indications that the second largest Swiss bank has caught the market’s attention due to a series of failures and losses.
Among them, a loss of nearly 4 billion Swiss francs (Rp 60 trillion) in the past three quarters. Meanwhile, borrowing costs have soared due to a rating downgrade.
3. Mirip Lehman Brothers?
Some reports linking the Credit Suisse stock crash are similar to what happened at Lehman Brothers in 2008. The reason is that at the time Lehman Brothers was considered too big to fall.
The company’s downfall also severely impacted the financial markets of the United States (USA). Lehman had reduced its budget by $ 188 billion five days before the bankruptcy.
In fact, before going bankrupt, Lehman was considered a good performance. Between 2004 and 2007 Lehman continued to break records. From 1994 to 2007 it was able to generate a net profit of 600% from $ 2.73 billion to $ 19.2 billion.
Until the first half of 2008, there was nothing strange about Lehman. In March, Fuld even received a $ 22 million bonus for achieving a remarkable 5% increase in profits to $ 4.2 billion in 2007.
Until then, the public was unaware that the Lehman safe had been breached by billions of derivative transactions. Most importantly, after Bear Stearns admitted bankruptcy in March and the failed Fannie Mae and Freddie Mac in July 2008.
4. Will it result in a financial crisis?
Assuming that the Credit Suisse crash will impact financial markets like Lehman Brothers, Citi analysts say there is no high chance of a market crash. The reason is that there have been no systemic problems affecting Credit Suisse.
“We understand the concerns [pasar]but the current situation is like 2007 day and night because balance sheets are fundamentally different in terms of capital and liquidity, “says the Citi report.
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