Credit Suisse's situation is being discussed by the Swiss government

Credit Suisse Group AG and Swiss authorities are in the process of discussing ways to stabilize the bank, according to people familiar with the situation, after comments by the bank's biggest shareholder on Wednesday triggered a dramatic drop in its share price.

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A number of options have been discussed between the firm's leadership and government officials, ranging from a public statement of support to a liquidity backstop, according to people who asked not to be identified describing private discussions. Among the ideas floated are also the separation of CIB's Swiss unit from its parent company, as well as an orchestrated tie-up with CIB's larger rival UBS Group AG, the sources said, cautioning that it is still unclear which, if any, of these measures will be implemented.

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After the bank's shares plunged to a record low and the cost of insuring its debt reached crisis levels, scenario planning has gained urgency. Finma and the Swiss central bank have been asked for public statements of support by the lender, sources said. One of the people said a statement might come as early as Wednesday.

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There is no comment from the Swiss National Bank, Credit Suisse, or UBS spokespersons. In response to requests for comment, the nation's finance ministry did not provide any information.

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The Saudi National Bank ruled out increasing its stake in Credit Suisse because of regulatory constraints, causing its stock to plunge 31% on Wednesday. Following the collapse of Silicon Valley Bank, investors retreated from banking risk after the plunge helped drag all European lenders lower. 

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Ulrich Koerner, the bank's chief executive officer, preached patience on Tuesday and said the bank's financial position was sound. He pointed out that the bank has a liquidity coverage ratio of more than a month's worth of outflows, which indicate that if the bank is stressed, it will be able to handle more than a month's worth of outflows. Axel Lehmann, the Chairman of the company, had stated at a conference on Wednesday that government assistance is "not a topic" and the firm's efforts to return to profitability are not comparable to the severe liquidity issues hitting smaller lenders in the US.

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Ralph Hamers, CEO of UBS Group AG, declined to respond to any “hypothetical” questions about Credit Suisse in a conference call on Wednesday, only saying that he is “focused on our own strategy.”

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This second-largest bank in Switzerland has been pummeled by a series of scandals, blowups, leadership changes, and legal troubles over the last few years. Last year's loss of 7.3 billion francs ($7.9 billion) erased the bank's decade-old profits, and the bank's second strategy pivot in as many years did not win over investors or halt client outflows. 

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Over $100 billion of assets were pulled out by clients in the last three months of last year as concerns mounted about the bank's financial health. The outflows have continued even after the bank raised 4 billion Swiss francs from shareholders in order to address the concerns.

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Credit Suisse is either facing a breakup or raising more capital due to high funding costs, Morningstar analyst Johann Scholtz said in a note on Wednesday. Another rights issue may be required, or the bank may need to "break up" its various business lines, such as its Swiss unit, asset manager, and wealth management divisions, to be "sold or listed separately."

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It has been fair to say that the Swiss unit of the central bank, which lends to national corporations and manages the money of wealthy individuals, has been a relative bastion of stability in the country. The division is the only one of Credit Suisse's four divisions that have produced pretax profit each of the last three years and have generated 1.5 billion francs in pretax income in 2022.