Credit Suisse shares tumble to new record low as European banking sector reels

The fresh losses came after the chairman of the bank’s top shareholder, Saudi National Bank, ruled out investing any more into the bank in a Bloomberg interview on Wedesday.

On Tuesday, Credit Suisse said in its annual report that it had material weaknesses in financial controls. Credit Suisse has lost money for five straight quarters, and its wealthy clients in the fourth quarter withdrew about $100 billion from the bank.

The Euro Stoxx banking index
SX7E,
-7.19%
dropped 7%, with shares of major French banks Societe Generale
GLE,
-10.11%
and BNP Paribas
BNP,
-9.81%
each falling 10%.

“There are a number of concerns here; firstly, traders are worried if Credit Suisse will be able to survive given that its stock has fallen below the two-handle level today, and if it doesn’t, how big the crisis is going to be. Secondly, the issue of tightening the monetary policy has made traders worried in Europe as well, while many still believe that the [European Central Bank] is going to do what it does best, which is to chase the curve,” said Naeem Aslam, chief investment officer at Zaye Capital Markets.

The ECB is meeting Thursday and is expected to increase interest rates by a half point.

The struggles for Europe’s banks dragged on broader market sentiment, with S&P 500 futures
ES00,
-1.76%
recently down about 2%.

Credit Suisse, which had 1.29 trillion francs ($1.4 billion) in assets under management as of the fourth quarter, lost 7.29 billion francs last year.

Switzerland’s financial regulator says Credit Suisse has both a recovery plan and a Swiss emergency plan, but it said preparatory measures for institution resolvability were “not yet adequate.” Credit Suisse, and rival UBS
UBS,
+3.25%,
would convert bonds into equity through a so-called bail-in process if necessary.