Why Credit Suisse Stock Plunged 71% in March

What happened

Shares of Credit Suisse (CS -1.39%) took a dive as it got swept in the global banking crisis and was forced to sell itself to UBS (UBS -0.29%) in a deal brokered by the Swiss government.

Credit Suisse is still publicly traded as the deal hasn’t closed yet, but the stock fell sharply last month, losing 71%, according to data from S&P Global Market Intelligence.

As you can see from the chart below, the stock fell sharply following the collapse of Silicon Valley Bank as problems with Credit Suisse became apparent.

CS data by YCharts.

So what

Banking stocks were already falling on the exposure of problems at Silicon Valley Bank as rapidly rising interest rates have created challenges for banks that held long-duration bonds.

For Credit Suisse, chinks in its armor appeared in early March after one of its longest-standing shareholders sold its entire stake in the bank. It also delayed the publication of its annual report, and its head of regulatory compliance quit.

The stock then started to unravel after the bank said it found material weaknesses in its financial reporting. The following day the stock plunged again as its top shareholder, the Saudi National Bank, said it refused to buy any more of the stock, a sign it would no longer bail out the struggling bank.

Credit Suisse then asked the Swiss National Bank to step in and offer it a loan or another form of support, and the Swiss National Bank said it would offer it liquidity if necessary. The following day, on March 16, Credit Suisse borrowed 50 billion Swiss francs from the Swiss National Bank, and as the stock spiraled and the bank’s untenable financial position became clear, a deal for UBS, another Swiss global, to take it over emerged brokered by the Swiss National Bank.

After back-and-forth offers from UBS, Credit Suisse agreed to sell itself to its rival for $3.3 billion and entered into the agreement on March 19.

Credit Suisse stock stabilized from there and closed out the month flat.

Now what

UBS is reportedly moving quickly to close the deal this month, and Credit Suisse stock was trading slightly above the buyout price, a sign that investors believe that the deal could change in their favor.

For Credit Suisse, the takeover could mean tens of thousands of layoffs and a major overhaul of its business. For investors, the deal seems likely to close with Credit Suisse stock trading where it is today.