Credit Suisse Shares Hit Record Lows After Disclosure of Material Weaknesses in Internal Controls

Credit Suisse, Switzerland’s second-largest bank, has been facing a tumultuous time as its shares hit a record low in morning trading on Switzerland’s stock exchange. The bank’s shares tumbled over 12% on Monday and were trading at 2.20 Swiss francs ($2.41) per share, down from a previous low of 2.41 francs hit on Friday. They are down almost 20% year to date.

The bank recently announced that it had detected “certain material weaknesses in our internal controls over financial reporting,” leading management to describe those controls as “not effective” for 2021 and 2022. The original publication date for the 2022 annual report in which it made that disclosure had previously been pushed back from the prior week.

The “failure to design and maintain an effective risk assessment process to identify and analyze the risk of material misstatements in its financial statements and the failure to design and maintain” certain “effective monitoring activities” were what the company said the weaknesses pertained to. The bank has said that the matter will be addressed as part of a plan it is working on.

Investor Robert Kiyosaki had earlier predicted that Credit Suisse was “the next bank to go because the bond market is crashing.” This was after Silicon Valley Bank and Signature Bank were shut down, which created turbulence in the stock market in recent days.

Credit Suisse is struggling to recover from a string of scandals, which have included the bank’s involvement in a Ponzi scheme in 2020, and the Archegos Capital Management fallout earlier this year. As a result, the bank has begun a major overhaul of its business, cutting costs and jobs, and creating a separate business for its investment bank under the CS First Boston brand.

For 2022, Credit Suisse posted net revenues of 14.92 billion Swiss francs, a 34% year-over-year decrease. Its net loss, meanwhile, widened from 1.65 billion Swiss francs to 7.29 billion, according to the bank’s annual report. The bank announced in October that it would be reducing its workforce by 5% in the fourth quarter and planned to trim its headcount even more by 2025.

Last week, Credit Suisse announced that it was delaying the publication of its annual report following a call from the U.S. Securities and Exchange Commission (SEC). The pushback of the annual report’s release was due to a “late call” over “certain open SEC comments about the technical assessment of previously disclosed revisions” to 2020 and 2019 cash flow statements “as well as related controls” that the SEC placed on the company March 8, according to Credit Suisse.

The bank tweeted on Tuesday that it wanted to “reiterate, as announced this morning, our financial results for 2022 and preceding years are accurate and reliable.” That, it said, was “supported by a clean audit opinion” by external auditor PwC.

The bank’s debt was also falling on Monday, with the lender’s U.S. dollar perpetual bonds being hit most and declining between five and ten cents on the dollar, Refinitiv Eikon data showed. Europe’s STOXX bank index (.SX7P) was down 5.7%, having shed 3.78% on Friday, leaving it on track for its biggest two-day fall since Russia began its invasion of Ukraine in February 2022.