Ammar Al Khudairy, the chairman of Saudi National Bank, gave that blunt response to a  Bloomberg reporter asking if the organization—currently the largest investor in Credit Suisse—would consider investing more money in the troubled Swiss bank.

The firm reply sent Credit Suisse’s shares into free fall on Wednesday—at one point falling by more than 30% before closing down 24%. The bank’s bonds also sank to distressed levels. Fear about Credit Suisse spread throughout the markets, wiping out over $60 billion in value from European banks.

By the day’s end, the Swiss bank announced that it was ready to borrow up to $54 billion from the country’s central bank. “These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation,” chief executive Ulrich Körner said in a statement following the announcement of Credit Suisse’s borrowing.

The strong action might have helped stem the bleeding, with shares in Credit Suisse rising by as much as 40% as markets in Zurich opened on Thursday. European banking shares also recovered. 

Credit Suisse did not immediately respond to a request for comment.

Scandals

Al Khudairy’s answer was a bombshell for investors already spooked by the broader crisis roiling the banking sector, spurred by SVB’s failure last week. Yet Credit Suisse has been struggling for years, plagued by scandals, a string of CEOs, and customer outflows. The bank is on its third CEO and its second restructuring plan in just three years.

First, Credit Suisse’s CEO Tidjane Thiam resigned in 2020 and was replaced with Thomas Gottstein, following a scandal where the bank spied on current and former employees. 

Credit Suisse then lost billions with the implosion of Archegos Capital Management, a family office run by Bill Hwang. The financier was able to borrow billions from large banks, including Credit Suisse, despite once pleading guilty to insider trading. When the dust settled, Credit Suisse was left with $5.5 billion in losses. 

An internal review found that Credit Suisse employees did not properly raise concerns about Archegos to their superiors. Even worse, the report said that a drain of “risk officer experience” from the bank, following cost cuts in 2019, meant Credit Suisse missed important warning signs.

The bank was then hit by the bankruptcy of Greensill Capital, also in 2021. Credit Suisse ran about $10 billion worth of funds with the firm, and has yet to recover all of its funds, with about $2.6 billion outstanding as of February 2023. Earlier this year, Swiss regulators blasted Credit Suisse for having “seriously breached its supervisory obligations” with regard to Greensill.

Credit Suisse booted Gottstein as CEO last July in favor of Ulrich Körner. “Our bank is undoubtedly facing a challenging situation. The need for change was clear,” Credit Suisse chairman Axel Lehmann said at the time. Lehmann was also relatively new to the role of chairman, taking over in January 2022 after his predecessor broke quarantine rules in both Switzerland and Spain.

Jumpy investors

Credit Suisse’s investors have been jumpy for a few months now, even before the banking crisis of the last week. Shares in the bank fell by 69.3% over 2022.

In early October, Körner said that the bank was at a “critical moment” in a letter to employees. That phrase was enough to send shares plunging by double digits that day. 

Later that month, Credit Suisse said it would spin off its investment bank and securitized product group, as well as cut $2.5 billion in costs and lay off 9,000 employees. It also raised $4.3 billion in new capital last year, in a round including Saudi National Bank.

Credit Suisse reported a $7.9 billion loss for 2022, its largest since the 2008 financial crisis. It also reported a sharp increase in outflows in the most recent quarter, totaling over $120 billion, and forecast another “substantial” loss this year. 

Some of the bank’s longtime investors are fed up. Last week, David Herro, chief investment officer for Harris Associates, said his firm had dumped its holdings of Credit Suisse. The firm owned about a tenth of the bank as late as last year, and it largely stuck by the bank for almost 20 years.

“There is a question about the future of the franchise,” Herro told the Financial Times at the time. “Why go for something that is burning capital when the rest of the sector is now generating it?”

What happens next?

It seems for now that Credit Suisse’s new lifeline from the central bank is calming markets, with banking stocks recovering on Thursday morning. 

“It is important to focus on facts and reinforce the strengths of the bank,” Körner wrote employees in a memo sent Thursday morning, reports Bloomberg. 

Al Khudairy is also appealing for calm after his comments sparked Wednesday’s market chaos. “It’s panic, a little bit of panic. I believe completely unwarranted, whether it be for Credit Suisse or for the entire market,” he told CNBC on Thursday morning.