Credit Suisse (NYSE:CS) clients have withdrawn billions of dollars.
In November, the bank warned investors in a 6-K filing of potential losses due to naked short covering.
Disarming these types of overleveraged positions won’t be easy.
Credit Suisse took a massive hit of $4.09 billion in Q3 and hinted at occurring losses in an upturn in markets.
Now Credit Suisse as postponed publication of its annual report, per Reuters — more on that below.
The bank hired 20 banks for a $4 billion injection in effort to pivot from Q3’s disaster.
Is Credit Suisse on the verge of collapsing?
Here’s the latest Credit Suisse news and update.
Credit Suisse Delays Annual Report..
(Reuters) Credit Suisse has postponed publication of its annual report after a last-minute call from the United States Securities and Exchange Commission (SEC), which raised questions about its earlier financial statements.
The unusual intervention by the U.S regulator is the latest blow to Credit Suisse as it attempts to rebuild investor confidence after a series of scandals and setbacks that have sent its shares plunging and led clients to withdraw billions.
Credit Suisse shares were close to their all-time low in Zurich on Thursday but later recovered much of a 6% loss.
The Zurich-based bank said the SEC had called it late on Wednesday regarding “certain open SEC comments about the technical assessment of previously disclosed revisions to the consolidated cash flow statements in the years ended December 31, 2020, and 2019, as well as related controls.”
The bank had revised how it booked a series of cash flows, including share-based compensation and foreign exchange hedges.
Credit Suisse (CSGN.S) said that following the call it had decided to postpone publication of its 2022 annual report.
“Management believes it is prudent to briefly delay the publication of its accounts in order to understand more thoroughly the comments received,” it said, adding that the 2022 financial results “are not impacted”.
The SEC declined to comment on the matter, a spokesman for the organization said.
Other regulatory authorities were not involved, a person familiar with the matter said.
Swiss financial regulator Finma told Reuters that Credit Suisse had informed it of the delayed publication.
“We are in contact with the bank,” Finma said.
The Bank Signals Red Flags and Raises Concerns
It remains unclear when the annual report will be released.
The delay was unusual, said five attorneys and experts.
“The disclosure is strategically and carefully worded so as not to raise alarms,” said Jacob Frenkel, a former SEC enforcement attorney who is now government investigations and securities enforcement practice chair for law firm Dickinson Wright.
It “lays the groundwork for the explanation for the revisions to the financial statements. Nothing about the release has an ‘enforcement’ centric tone.”
Still, the Credit Suisse announcement concerned analysts.
“(It) does not help investor sentiment and it does not help in rebuilding trust,” said Andreas Venditti from Vontobel.
Daniel Bosshard from Luzerner Kantonalbank described Credit Suisse as “a major construction site” and said “the share is only suitable for turnaround speculators.”
In February, Credit Suisse reported that 2022 brought its biggest annual loss since the 2008 global financial crisis after rattled clients pulled funds from the bank, and it warned that a further “substantial” loss would come this year.
Among a string of scandals, Credit Suisse was hard hit by the collapse of U.S. investment firm Archegos in 2021 as well as the freezing of billions of supply chain finance funds linked to insolvent British financier Greensill.
The bank was also rocked by a prosecution in Switzerland involving laundering money for a criminal gang.
Meanwhile, credit ratings agency Standard & Poor’s downgraded Credit Suisse to just one level above so-called junk status in November last year.
Credit Suisse Warns Investors of Naked Short Covering
The SEC released Credit Suisse’s 6-K filing where the bank warns investors of potential losses due to naked short covering, more on that below.
Credit Suisse took a massive hit of $4.09 billion in Q3 and hints at occurring losses in an upturn in markets.
The bank recently called out AMC Entertainment predicting shares to fall to $0.95 despite the bank’s shares trading below the movie theatre chain company.
Now Credit Suisse is hiring 20 banks for a $4 billion injection in effort to pivot from Q3’s disaster.
In this 6-K filing, Credit Suisse warns investors of potential losses due to the high possibility of naked short covering.
In a statement, the bank says, “Conversely, to the extent that we have sold assets that we do not own, or have net short positions, in any of those markets, an upturn in those markets could expose us to potentially significant losses as we attempt to cover our net short positions by acquiring assets in a rising market.“
“Market fluctuations, downturns and volatility can adversely affect the fair value of our positions and our results of operations.
Adverse market or economic conditions or trends have caused, and in the future may cause, a significant decline in our net revenues and profitability.”
The closing of naked shorts would send affected securities soaring as buying momentum compounds.
Heavily shorted stocks may squeeze in the process, but the results would be disastrous to short sellers.
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