Social media speculation that Credit Suisse was on the brink of collapse sent shares of the Swiss bank on a wild ride in recent days, as investors traded off the frenzy and bought up protection in case of a default.
Yet it's come under renewed scrutiny following a memo to employees from CEO Ulrich Körner sent Friday, which sought to allay any concerns about the bank's financial health before a restructuring plan is unveiled on October 27. The letter backfired, fuelling apprehension about the bank instead of tamping it down.
Credit Suisse's business is under serious strain. It's preparing to shrink its investment bank and beef up its wealth management arm — an expensive endeavor that could cost 6 billion Swiss francs , according to a recent analysis from Keefe, Bruyette & Woods. Asset sales would likely cover just 2 billion Swiss francs.
Körner's note Friday acknowledged that it's "a critical moment for the whole organization." However, analysts emphasize that there's no indication the bank faces a more existential threat, even if coming up with the funding to execute an effective restructuring could prove challenging.
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