(Bloomberg) -- A top shareholder ruled out adding to its stake in Credit Suisse Group AG, deepening the crisis at the storied Swiss bank and leaving its leaders struggling to shore up confidence amid market chaos that’s spreading from Europe to the US.

The chairman of Saudi National Bank, which became Credit Suisse’s biggest shareholder late last year, said that the bank wouldn’t boost its share of the bank past the current level of just under 10%. 

“The answer is absolutely not, for many reasons outside the simplest reason, which is regulatory and statutory,” Ammar Al Khudairy said in an interview with Bloomberg TV on Wednesday. That was in response to a question on whether the bank was open to further injections if there was another call for additional funds.

The Swiss bank’s stock plunged to the lowest level on record and its credit spreads surged following the comments. That helped drag all European banks lower as investors shy away from risk after the turmoil of the past week. 

Credit Suisse is just a few months into a complex reshaping that will see it spin out the investment banking unit while focusing on its key wealth management business. Its second strategy pivot in as many years has so far failed to win over investors or halt client outflows, and the effort risks being further complicated by market unease across financials after the collapse of Silicon Valley Bank.

Chief Executive Officer Ulrich Koerner on Tuesday preached patience and said the bank’s financial position is sound. Chairman Axel Lehmann said at a conference Wednesday said government assistance “isn’t a topic” and the firm’s efforts to return to profitability aren’t comparable to the severe liquidity issues hitting smaller lenders in the US.

While Al Khudairy’s comments were consistent with the Saudi firm’s previous stance, it helped push Credit Suisse shares down as much as 31% to a new record low in Zurich, showing the fragility of bank stocks this week. Shares later pared some losses, down 15% as of 3:31 p.m. in Zurich. 

“In a jittery market, following the failure of Silicon Valley Bank in the US, Credit Suisse shares have sold off by more than 20% today,” Citigroup analysts wrote in a note to investors. Still, they said, comments by the Saudi National Bank Chairman appear “insufficient to explain the magnitude of the market move.”

The cost to insure the bonds against default in the near term approached a level typically signaling serious investor concerns. The bank’s senior bonds led losses in Europe’s high-grade corporate bond market, slumping between 2.5 and 5 cents on the euro, based on data compiled by Bloomberg. Its deeply subordinated additional tier 1 notes are all indicated well below 80% of face value, a level associated with distress.

The firm’s market value had already fallen this week to a level near where it was before the capital raise.

“Nobody is pleased by the share price development, but we manage what we can manage, and this is the execution of our plan,” Koerner said in a Bloomberg Television interview Tuesday. “We said it’s a three year transformation, and you can’t come after two months, ‘Why is everything not done?’”

Koerner on Tuesday pointed to the firm’s liquidity coverage ratio, which indicates the bank can handle more than a month of heavy outflows in a period of stress. He said that the firm saw inflows on Monday amid the market turmoil and is ahead of schedule on its turnaround plan. 

Switzerland’s second-largest lender, which traces its roots back to 1856, has been pummeled over the last several years by a series of blowups, scandals, leadership changes and legal issues. The company’s 7.3 billion franc loss last year wiped out the previous decade’s worth of profits. 

Clients pulled more than $100 billion of assets in the last three months of last year as concerns mounted about its financial health, and the outflows have continued into this year even after it tapped shareholders in a 4 billion franc capital raise. 

Harris Associates, which was the bank’s biggest shareholder before Saudi National Bank with a 10% stake at one point, sold its entire holding over the past several months. 

Saudi Stake

Saudi National Bank, which is 37% owned by the kingdom’s sovereign wealth fund, acquired a roughly 9.9% stake in the Swiss lender for 1.4 billion francs as the anchor investor in the Swiss bank’s capital raise. The stake has lost more than 500 million francs in a matter of months. The Saudi lender has consistently said it doesn’t want to go above a 10% level that would bring regulatory hurdles. 

Al Khudairy said in October that he “likes” Credit Suisse’s new leadership and their resolve to execute on its turnaround plan, but any additional equity for the moment is “out of the question.” He reiterated that Wednesday.

“If we go above 10%, all new rules kick in whether it be by our regulator or the Swiss regulator or the European regulator,” he said in Wednesday’s interview. “We’re not inclined to get into a new regulatory regime. I can cite five or six other reasons, but one reason is there is a glass ceiling and we’re not going to entertain going beyond it.”

CS First Boston

Al Khudairy also said his bank wasn’t interested in taking a stake in CS First Boston, the investment bank that Credit Suisse is carving out. 

While Koerner cited several key metrics to demonstrate the bank’s financial strength, including the intention to keep a CET1 ratio of 13% throughout the overhaul, concerns about the bank’s future are persisting. The CDS level is about 9 times that of Deutsche Bank and 18 times that of UBS Group AG. The CDS curve is also deeply inverted, meaning that it costs more to protect against an immediate failure at the bank instead of a default further down the line.

The Swiss National Bank declined to comment on Credit Suisse’s situation when reached earlier on Wednesday.

Ralph Hamers, CEO of larger rival UBS Group AG, said he wouldn’t answer “hypothetical questions” about its struggling rival. Speaking at the Morgan Stanley European Financials Conference in London on Wednesday, he said the bank is focused on its own strategy.

--With assistance from Adveith Nair, Tasos Vossos and Francine Lacqua.

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