Credit Suisse seeks billions from investors in make-or-break shake-up

Credit Suisse seeks billions from investors in make-or-break shake-up

  • A comprehensive overhaul aims to restore confidence in the bank
  • CEO says “we have to get this right”
  • Shares fall as much as 16%

ZURICH, Oct 27 (Reuters) – Credit Suisse ( CSGN.S ) plans to raise 4 billion Swiss francs ($4 billion) from investors, cut thousands of jobs and shift focus from investment banking to wealthy clients as the bank tries to close years. of scandals behind.

Chairman Axel Lehmann called the plan a “plan for success,” but it fell flat with investors after the bank’s unexpected loss of 4 billion Swiss francs in the third quarter.

Its share price, which has hit record lows in recent weeks, fell as much as 16% before losses, valuing the bank at around 11 billion francs.

Analysts said many questions were unanswered.

“You come away with the feeling that they rushed to publish (the news) this morning with a deeply flawed plan,” the Goldman Sachs analyst wrote, but one whose “impossibly low” targets will be beaten.

“Resolute execution and no further missteps will be key and it will take time for the results to start showing,” Vontobel analyst Andreas Venditti said.

Credit Suisse said clients withdrew money in recent weeks at a rate that saw the lender breach some regulatory requirements for liquidity, highlighting the impact of wild market swings and a social media storm.

The group said it was stable throughout.

The turnaround plan has many elements, from cutting jobs to focusing on banking for the wealthy.

It will cut 2,700 jobs or 5% of its workforce by the end of this year, ultimately reducing its workforce by about 9,000 to about 43,000 by the end of 2025.

The Swiss bank also aims to separate its investment bank to create CS First Boston, focused on advisory work such as mergers and acquisitions and arranging deals in capital markets.

The bank envisions selling a stake but keeping roughly 50% of the new business, a person familiar with the matter said. It is also exploring the possibility of an initial public offering.


Saudi National Bank (SNB) (1180.SE), majority-owned by the government of Saudi Arabia, said it will invest up to 1.5 billion francs in Credit Suisse to take a stake of up to 9.9% and may invest in the investment bank .

The move strengthens Saudi influence in one of Switzerland’s best-known banks. Olayan Group, one of the largest Saudi family-owned conglomerates, with a multibillion-dollar investment portfolio, also owns a 5% stake in the bank.

A clock is seen near the logo of Swiss bank Credit Suisse at the Paradeplatz square in Zurich, Switzerland October 5, 2022. REUTERS/Arnd Wiegmann/File Photo

The Qatar Investment Authority – which owns about 5% of the Swiss bank – declined to comment on whether it plans to buy any shares.

Proxy adviser Ethos Foundation said it was disappointed Credit Suisse took so long to follow a path rival UBS ( UBSG.S ) had taken to increase focus on wealth management, while shrinking investment banking.

It criticized the bank for allowing the SNB to get a large stake at a bargain price, adding: “This plan is dramatic for the current shareholders who will suffer a very significant dilution effect.”

Credit Suisse said it will create a capital release unit to spin off non-strategic, higher-risk businesses, while announcing plans to sell a large part of its securitized products business to an investor group led by Apollo.

The bank will also wind down certain trading activities in emerging markets and equities.

Its big third-quarter loss was largely due to write-downs linked to its investment banking overhaul, including adjustments for lost tax credits.

JPMorgan analysts said “question marks remain” over the investment banking restructuring, adding that the stock selloff would also weigh on the stock.

The revamp, aimed at overcoming the bank’s worst crisis in its history, is the third attempt in recent years by successive CEOs to turn the group around.

Reuters Graphics Reuters Graphics

Once a symbol of Swiss reliability, the bank’s reputation has been tarnished by scandals, including an unprecedented domestic indictment involving money laundering for a criminal gang.

The bank had been pushing to sell assets to raise money and free up capital to try to limit how much money it would need to raise from investors to fund its overhaul, deal with its legacy legal costs and maintain a cushion for tough markets ahead.

Credit Suisse’s series of costly and morally damaging mistakes triggered a major change in management.

Last year, the bank took a $5.5 billion loss from the break-up of US investment firm Archegos and had to freeze $10 billion in supply chain finance funds linked to insolvent British financier Greensill, highlighting failings in risk management.

Its deepening problems even put it on the radar of day traders earlier this month, when a frenzy of wild speculation about its health sent the share price to a record low.

($1 = 0.9858 Swiss francs)

Additional reporting by Michael Shields in Zurich and Yousef Saba in Dubai; Written by John O’Donnell; Editing by Edmund Klamann and Jane Merriman

Our standards: Thomson Reuters Trust Principles.

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