Whenever there is a bit of jitter in the global banking world, Credit Suisse Group AG seems to get a beating. It needs to pre-emptively improve the public narrative before the crazy, rich and anxious Asians pull all their money out of the Swiss bank.
After a record slump in its share price and a spike in its credit default swaps, Credit Suisse is trying to restore confidence.
On Thursday, it said it would borrow up to US$54 billion from the Swiss National Bank, which had offered to provide a liquidity backstop if needed.
The lender also said it would repurchase senior debt securities for up to about 3 billion Swiss francs (US$3.2 billion).
That is just a small bit of relief for its private banking clients in Asia, who have been amazed and mesmerized by the venerable Zurich-based lender’s fast fall from grace.
How Asians view the Swiss bank matters.
From 2016 to 2020, the region contributed one-third of the profit growth in its wealth management division, and 48 percent cumulative growth in invested assets, HSBC Holdings PLC said.
Hong Kong, Beijing and Singapore are among the top 10 cities where the super-rich — or those with more than US$30 million in net worth — live.
Credit Suisse can no longer brand itself as a global wealth manager without its rich Asians.
In this region, Credit Suisse has faced a lot of hurdles lately. Wealthy Chinese clients have become much more worried about parking money in Swiss banks because of the nation’s tough approach to applying sanctions.
Its neutrality is in question — the government has moved in lockstep with the EU in penalizing Russian President Vladimir Putin’s wealthy associates.
To make matters worse, SVB Financial Group’s US$42 billion withdrawal requests and its subsequent collapse is a fine reminder that Credit Suisse displays very similar problems.
In December last year, customer deposits tumbled by 40 percent from three months earlier.
Its top wealth managers were fleeing to competitors, taking their clients with them.
To stem outflow in Asia, the lender recently raised its three-month deposit rates for new deposits of US$5 million and above to as much as about 6.5 percent.
That is 1.5 percentage points higher than direct rival UBS Group AG offers, data compiled by Bloomberg showed.
This juicy rate smacks of desperation. Almost all the bank’s deposits have contractual maturity of less than a year, Citigroup Inc said.
Because of its exposure to high-net-worth individuals, a big chunk is likely uninsured. Switzerland guarantees deposits of up to SF100,000 only.
The Chinese are particularly skittish and sensitive to negative news flow.
After all, they have witnessed and suffered from Beijing’s latest regulatory crackdowns. An entire after-school tutoring industry — which had been a venture capital hot spot — vanished overnight.
Wealthy clients used to love buying US dollar bonds issued by real-estate developers such as China Evergrande Group, lured by their handsome coupon payments.
That lucrative trade went up in flames after a record wave of developer defaults.
As the wealthy Asians are finding out, there is no point chasing after yield if you are not sure you can have your principal back.
From sanctions risk to the safety of their deposits, Credit Suisse has a lot of client queries to address.
It also does not help that its customers have been recently traumatized by China’s sudden policy U-turns.
To keep its Asian operation going, the Swiss bank has a lot more work to do than issuing press releases.
It needs to appease its clients in Asia — its profit and growth center.
Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. A former investment banker, she was a markets reporter for Barron’s. She is a CFA charterholder. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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