Credit Suisse mkt turmoil deepens after CEO memo backfires; stock falls 12%

Credit Suisse Group AG shares briefly turned positive in a wild day of trading that saw them drop as much as 12% before climbing back to near where they closed last week.

The stock recovered late on Monday after several analysts published notes bolstering bank executives’ arguments that the firm has ample capital and liquidity to weather the current uncertainty and market volatility. That’s ahead of its second restructuring in as many years. 

The gyrations came on a day in which the stock plunged to a fresh record low and costs to insure the bank’s debt against default jumped to its highest ever level. Markets took fright at attempts by top management to reassure investors about the firm’s capital strength and liquidity, instead focusing investors’ attention on dramatic recent stock and credit spread moves.

Credit Suisse shares rebounded from the record low to gain as much as 0.2% at one point, and were down 0.8% to 3.94 francs as of 5:22 p.m. in Zurich. That compared with a close at 3.98 francs on Friday.

The turmoil was sparked by a memo late that day from Chief Executive Officer Ulrich Koerner, in which he had sought to play down speculation surrounding the bank’s overhaul plans, which it expects to announce on Oct. 27. While arguing that the bank’s capital levels and liquidity are strong, he acknowledged that the bank is at a “critical moment.”

While that -- and a barrage of commentary on twitter over the weekend -- caused a rush to the exits when trading resumed, some analysts attempted to calm investor tensions. 

“The liquidity position is very healthy,” analysts at Citigroup led by Andrew Coombs wrote in a note to investors. “Rather than liquidity concerns, we see the current move in spreads as an inconvenience for funding costs.”