BNP Paribas, Société Générale, Commerzbank… European banks plunge more than 10% on the stock market

European banks are in turmoil. At around 11:30 GMT, BNP Paribas was down 11.11%, Societe Generale down 11.01% and Commerzbank down 10.08%, while Credit Suisse was down more than 20%. And the European indices lose 2.9% in Frankfurt to 3.85% in Milan.

The reason for this collapse? Fears for Credit Suisse. The stock of this bank is in free fall after the statements of its Saudi shareholder who explained that he “absolutely” does not want to increase his stake in the country’s second largest bank. The title thus lines up a third consecutive session of strong shocks, sinking again a historic low in a market already very nervous as regards the banking sector, after the bankruptcy of the American bank SVB.

A heavy restructuring for Credit Suisse

The Saudi National Bank became Credit Suisse’s largest shareholder in a capital raise in November, launched to finance a major restructuring of the bank. Asked by Bloomberg TV whether the Saudi establishment could invest more, its chairman, Ammar al-Khudairy, clearly ruled out that option. “The answer is absolutely not,” he said, “for several reasons beyond the simplest ones, which are regulatory and statutory,” he added.

For his part, the president of Credit Suisse, Axel Lehmann, said that the institution he heads does not need government aid. It’s not “an argument,” he said at a banking conference in Saudi Arabia. “We have solid financial relationships, a solid balance sheet,” he insisted, assuring the bank had “the medicine” it needed.

As for the head of the Saudi national bank, he explained: “we currently hold 9.8% of the bank. If we exceed 10% a series of new rules will enter into force” and “we are not inclined to enter a new regulatory regime.” Under Swiss law, the Finma, the market supervisory authority, must decide whether a shareholder of a large bank exceeds the 10% threshold.

A share under two Swiss francs

Exceeding this 10% threshold in Switzerland’s second largest bank could cause a stir in the Alpine country as shareholders have already seen their stake diluted during the capital increase and continue to see the value of their placement plummeting.

On Wednesday, the stock lost as much as 23.6% to hit a new all-time low at 1.707 Swiss francs. The stock has lost more than 83% of its value since the bankruptcy of the British financial firm Greensill, which marked the beginning of a series of scandals that have weakened the bank.

Some shareholders ended up throwing in the towel, such as the American investment firm Harris Associates, its longtime largest shareholder, which revealed last week that it had completely divested its stake in the bank.

The weak link in the sector in Switzerland

In early February, Credit Suisse announced a net loss of 7.3 billion Swiss francs (nearly 7.4 billion euros) for the 2022 financial year amid massive withdrawals from its clients and warned to still expect a “substantial” pre-tax loss in 2023.

The bank has continued to rack up setbacks ever since. The stock was already shaking in the stock market on Tuesday when the bank admitted “substantial weaknesses” regarding its internal controls for its financial reporting. The markets are feverish towards Credit Suisse after the shocks triggered by the bankruptcy of the US bank SVB, considered the weak link in the sector in Switzerland.