Credit Suisse Group AG (CSGN) dropped to its lowest price in more than 19 years after the Swiss central bank urged Switzerland’s second-largest lender to increase its capital this year.
The stock slumped as much as 8.8 percent to 17.32 Swiss francs, its lowest intraday price since December 1992. Credit Suisse, based in Zurich, traded 7.8 percent lower at 17.51 francs at 11:35 a.m., giving it a market value of 22.5 billion francs ($23.5 billion).
“For Credit Suisse, given the low starting point and the risks in the environment, it is essential that it already substantially expand its loss-absorbing capital base during the current year,” the Swiss National Bank said in its annual financial stability report.
The central bank, which also recommended UBS AG (UBSN) boost capital, said improvements can be achieved by suspending dividend payments or selling new shares in addition to the banks’ plans for cutting assets.
This is the first time since the SNB began publishing the financial stability report in 2002 that it singled out Credit Suisse as needing a bigger improvement in capital than UBS and putting a time frame on its recommendation.
“The third dividend cut in three years may be a precursor to significant management changes, which will cause further uncertainty,” said Christopher Wheeler, an analyst with Mediobanca SpA. “In addition, while the bank has been vigorous in de-leveraging, it may have to do more and reduce its credit trading risk appetite.”
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