BlackRock and other investment managers own 16% of shares of Credit Suisse (CSGKF) in various ETFs and mutual funds they manage which are purchased by pension funds and other retirement accounts.
Shares of the Swiss banking giant have fallen by as much as 10% since it has been embroiled in a series of financial scandals. The No. 2 Swiss bank is fighting for its survival currently.
A negative outcome could have a ripple effect similar to the bankruptcy of U.S. bank Lehman Brothers in September 2008. When Lehman Brothers imploded, its demise contributed to one of the most serious financial and economic crises since the Great Depression.
BlackRock Advisors, Harris Associates, Litman Gregory Fund Advisors, Natixis Advisors, Massachusetts Mutual Life Insurance Co. and Brandes Investment Partners are the top 10 holders of the stock within ETFs and mutual funds and have the most exposure.
Retail investors, pensions and other retirement accounts, including 401(k) accounts own shares of these ETFs and mutual funds that are managed by investment advisors. The funds include the Blackrock Active Stock Master Portfolios, Daiwa Harris Global Selected Equity Fund, Oakmark Global Select Fund and the iMGP International Fund
BlackRock is known for its iShares ETFs such as the iShares Core S&P 500 ETF (IVV) which has a market cap of $19.4 billion.
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CEO Comments Not Calming
CEO Ulrich Körner's comments in a memo to its staff on Sept. 30 have not calmed investors. He said there were "many factually inaccurate statements being made” in media coverage of the bank’s situation. Shares of Credit Suisse have declined by 58% this year and were down by 9% at one point on Oct. 3.
For the past several months, the Swiss investment bank faced rumors since the behemoth said in July it would change the focus of its business and exit some units to lower its risks.
Credit Suisse has faced several financial difficulties, including a massive loss of $5.1 billion from its client, Archegos Capital Management in 2021.
The cost of insuring the bank's bonds from defaulting rose at least 15% last week, which are levels that have not occurred since 2009 in the aftermath of the financial crisis, also known as the Great Recession.
Reminiscent of Great Recession
Several investment banks and insurance companies imploded during the Great Recession when their bets on mortgage-backed securities backfired.
The September 2008 images of Lehman Brothers employees leaving its former New York headquarters with boxes in hand are at the forefront of many minds.
Although Lehman Brothers is the investment bank that is the most well known one during that period as art imitated real life in movies and plays about its collapse, other banks and insurance companies also failed.
Some companies were restructured and survived by being acquired by a competitor. Bear Stearns, another investment bank, was rescued when it was bought by Bank of America. The largest residential mortgage lender Countrywide also went under, while large residential lender Washington Mutual folded. Mega insurance company AIG had to be bailed out with billions in losses.
The era of the most serious financial and economic crisis since the Great Depression could have resurfaced again as Credit Suisse comes under immense scrutiny.
Credit Suisse's CEO is expected to announce the bank's turnaround strategy on Oct. 27.
