Credit Suisse gets $54 billion lifeline from Swiss National Bank

Credit Suisse Group on Thursday said it intends to exercise its option to borrow from the Swiss National Bank (SNB) up to 50 billion francs ($54 billion) to pre-emptively strengthen its liquidity.

The cash-strapped lender will tap the funds under a covered loan facility as well as a short-term liquidity facility, which are fully collateralised by high quality assets.

This additional liquidity would support Credit Suisse's core businesses and clients as the lender takes the necessary steps to create a simpler and more focused bank built around client needs, the financial services giant says in a statement.

The development comes a day after Credit Suisse led a selloff in bank shares after its largest investor, the Saudi National Bank, said it could not provide more financial assistance because of regulatory constraints. This added to the banking sector woes which were triggered by the collapse of Silicon Valley Bank and Signature Bank in the U.S.

The troubled Swiss bank is also making a tender offer to buy back up to three billion francs of dollar- and euro-denominated debt. "Credit Suisse also announces today that it is making a cash tender offer in relation to ten US dollar denominated senior debt securities for an aggregate consideration of up to USD 2.5 billion. Concurrently, Credit Suisse is also announcing a separate cash tender offer in relation to four Euro denominated senior debt securities for an aggregate consideration of up to EUR 500 million. Both offers are subject to various conditions as set out in the respective tender offer memoranda," the lender says.

"The offers will expire on March 22, 2023, subject to the terms and conditions set out in the offer documents. The transactions are consistent with our proactive approach to managing our overall liability composition and optimizing interest expense and allow us to take advantage of current trading levels to repurchase debt at attractive prices," it adds.

"These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders. We thank the SNB and FINMA as we execute our strategic transformation. My team and I are resolved to move forward rapidly to deliver a simpler and more focused bank built around client needs," says Credit Suisse CEO Ulrich Koerner.

As of the end of 2022, Credit Suisse had a CET1 ratio of 14.1% and an average liquidity coverage ratio (LCR) of 144%, which has since improved to approximately 150% (as of March 14, 2023).

Credit Suisse says it is conservatively positioned against interest rate risks. "The volume of duration fixed income securities is not material compared to the overall HQLA (high quality liquid assets) portfolio and, in addition, is fully hedged for moves in interest rates," the lender says.

"Moreover, the loan book is highly collateralized at almost 90%, with more than 60% in Switzerland and an average provision for credit loss ratio of 8 bps across Wealth Management and the Swiss Bank," it adds.