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Credit Suisse bonds, stock fall as bank turnaround worries investors

FILE PHOTO: Logo of Swiss bank Credit Suisse is seen in Zurich

(Reuters) -Credit Suisse bonds fell and the cost of insuring its debt against default rose on Monday as the Swiss bank struggled to win over rattled investors following an exodus of client cash and with more litigation on the horizon.

Last week Switzerland's second-largest bank flagged that it was on course for a pre-tax loss of up to 1.5 billion Swiss francs ($1.58 billion) in the fourth quarter, and revealed that wealthy clients had made hefty withdrawals.

That had led to a big drop in liquidity, breaching some regulatory limits.

The bank had also revealed in an official filing for a capital hike that the U.S. Federal Reserve had said it intended to pursue an investigation of Credit Suisse over collapsed U.S. investment firm Archegos.

On Monday, investors were still digesting the news.

Five-year credit default swaps soared by 53 basis points (bps) to a record high of 398 bps from Friday's close, according to data from S&P Global Market Intelligence. Credit Suisse CDS opened the year at 57 bps.

Bonds also came under pressure, with the additional tier 1 dollar-denominated issues down more than 2 cents, hitting the lowest level in recent weeks.

The Swiss bank's share price also touched an all-time low on Monday.

The Federal Reserve announcement suggests the bank could face additional fines related to its connection to Archegos, whose collapse rocked Wall Street as its highly leveraged stock bets went sour.

Banks had scrambled for the exit and in a $10 billion bloodbath, Credit Suisse was the biggest loser -- a devastating double whammy for a bank already reeling from the insolvency of a key associate, Greensill Capital.

Credit Suisse's 4 billion franc capital raising is designed to help put the bank back back on track following the biggest crisis in its 166-year history.

(Reporting by Chiara Elisei and Noele Illien, editing by Karin Strohecker, John O'Donnell and Chizu Nomiyama)