Summary
- Blueprint to revamp Swiss bank due in one week
- Still unclear what businesses can be sold and for how much
- Lawmaker Matter: wind down U.S. investment banking
Credit Suisse is scrambling to conclude sales of part of its business that could limit the cash it requires from investors, a person familiar with the matter said, with just days to go before the bank discloses an overhaul.
The embattled Swiss lender wants to draw a line under a series of scandals and legal actions in an overhaul that would probably see it downsize a volatile investment bank in New York and London to concentrate on banking for the rich in Switzerland.
This restructuring is being closely monitored by Swiss regulator Finma, which is in constant contact with the bank, said a second person with knowledge of the matter, underscoring the sensitivity of the revamp.
But with just days remaining before the Oct. 27 announcement, it remains unclear what businesses can be sold and for what price – crucial pieces in a jigsaw that will decide how much the bank may have to request of shareholders.
Analysts have said the company might require as much as 9 billion Swiss francs ($9 billion) as part of a revamp, some of which may have to arise from investors and some from the sale of assets.
Management plans to dispose of businesses, such as securitized products, from its investment bank, the first person said, adding, however, that talks will probably take until the last minute before the overhaul is announced.
The bank recently introduced a process that could include disposing of its U.S. asset management arm, another source recently told Reuters, with initial expressions of interest expected at the end of this week. However, there was no promise of a sale.
On Thursday Credit Suisse also disclosed plans to sell an 8.6% stake in Allfunds Group, priced at 354 million euros ($346.96 million), via an accelerated book-building offering.
Credit Suisse is also looking to spin off part of its advisory and investment banking business, which could attract outside investors and be named First Boston, Bloomberg has reported.
If such deals do not take place or fail to meet expectations, Credit Suisse will opt for a capital increase, said that person. The bank refused to comment, prior to its official announcement.
Speculation Sent Credit Suisse Into Tailspin
Credit Suisse, one of the biggest banks in Europe, is attempting to recover from a string of scandals, including taking a loss of over $5 billion from the collapse of investment firm Archegos in 2021, when it also had to suspend client funds connected to failed financier Greensill.
In early October, in an unusual move, the Swiss National Bank, which manages the financial stability of systemically important banks in Switzerland, said it was observing the situation at Credit Suisse.
That came after unfounded speculation about the bank’s future on social media sent its stock plunging. The bank’s chairman has said its capital is robust. The stock price has almost dropped 50% in value this year.
The bank had earlier reached out to investors about a capital raise, sources with knowledge of the matter have said, suggesting that selling assets, such as its Savoy Hotel in Zurich, may not be sufficient.
Credit Suisse has appointed the Royal Bank of Canada to assist in organizing a capital increase to boost its finances and acquire funds for an overhaul, another person conversant with the matter said. Morgan Stanley is also taking part in the capital raise, the first source said.
Together with drawing the scrutiny of Swiss regulators, the episode has also attracted the attention of the country’s lawmakers.
Buy Bitcoin Now“I hope they announce the American side of the business will be scaled back – investment banking USA needs to be wound down,” said Thomas Matter, a leading parliamentarian from the Swiss People’s Party, the country’s largest party in parliament and a member of its ruling coalition.
“I am more worried that Credit Suisse will be bought at a bargain price by an American bank,” he said.
Ray Soudah, Chairman of Swiss mergers and acquisitions specialist Millenium Associates, said disposals risked making Credit Suisse “an even greater target”.
“This will dent the value of the company further because it reduces its income,” he said.
Last week, Credit Suisse’s chairman, Axel Lehmann, who assumed control in January, promised to reform the bank after a “horrible” 2021 in which it lost billions of dollars, the greatest ever loss in its history.
Ian Lapey, a manager at Gabelli Global Financial Services Fund and a shareholder in the bank, said it must formulate an ambitious plan to keep investors on the side such as by decreasing the size of its investment bank.
“If the company rolls out a plan that essentially makes a couple of minor changes and looks to raise capital, which will be very difficult.”
($1 = 1.0203 euros)
