Credit Suisse has just a few days to go before it unveils a major strategic overhaul and is busy selling off business assets, which means it needs less money from investors. The discredited Swiss lender is trying to recover from a series of scandals and lawsuits and could make a fundamental revision to slim down the volatile investment bank and focus on asset management. Analysts estimate that the bank could have a capital shortfall of up to 9 billion Swiss francs ($9.01 billion) – depending on what it does to slim down its investment bank and how much it gets from asset sales – to restructure, support growth and have a safety buffer. The group wants to reassure the market with its restructuring plan, more details of which are expected in the third quarter results on October 27. Why Is Credit Suisse In The Spotlight? Due to a series of losses, striking shortcomings in risk management and changes in top management, Switzerland’s second largest bank is under pressure. Credit Suisse had to raise capital, stop share buybacks, reduce dividends and renew management after losing more than $ 5 billion in March 2021 due to Archegos ‘ bankruptcy. An espionage scandal forced then-CEO Tidjane Thiam to step down in 2020, and the Swiss financial regulator said Credit Suisse had misled her about the extent of its oversight. His successor Thomas Gottstein held out until July 2022, when Credit Suisse turned to restructuring expert Ulrich Koerner as CEO and launched a second strategic review within a year. Chairman Axel Lehmann took over from Antonio Horta-Osorio in January, who resigned less than nine months after taking office for violating quarantine rules during the COVID-19 pandemic. Horta-Osario’s predecessor, Urs Rohner, admitted in his resignation last year that the bank had disappointed customers and shareholders, and not for the first time. Credit Suisse’s losses have risen to almost 4 billion Swiss francs in the past three quarters alone, while financing costs have risen due to credit rating cuts. What Assets Could It Sell? Credit Suisse has already said that it wants to strengthen its asset management activities, reduce its investment bank to a “low-capital, advisory” company and evaluate strategic options for its Securitised Products business. Last week, it sold an 8.6% stake in Allfunds Group for 334 million euros ($328.4 million). The company also sold a 30% stake in Energy Infrastructure Partners at an undisclosed price. Other assets reportedly up for sale include a stake in the SIX Group, which manages the Zurich stock exchange, two specialist Swiss banks, Pfandbriefbank and Bank-Now, and Swisscard, a joint venture with American Express. Credit Suisse wants to sell the Savoy Hotel in central Zurich, which could be worth 400 million Swiss francs. According to sources, the bank’s US asset management unit could raise about $ 2 billion on a sale. It is reported that money managers such as Janus, Blue Owl and others are attracting interest. The bank is also considering divesting some of its advisory and investment banking operations, which could attract outside investors and be named First Boston, the media said. What Other Ways Are There To Raise Money? The bank has approached investors for a capital injection, according to sources familiar with the matter. Credit Suisse reportedly hired Morgan Stanley and Royal Bank of Canada to help organize a capital increase to support its finances and secure funds for the restructuring. Another possibility that the Swiss bank is reportedly considering to help fund its turnaround plans is the issuance of convertible bonds. This would allow the bank to limit the sale of shares at the current low prices. Ultimately, Credit Suisse could rely on state aid. How Important Is The Bank? Since its founding in 1856, Credit Suisse has played a central role in the history and development of Switzerland. It was founded by the Swiss politician and businessman Alfred Escher to finance the country’s railways and support industrialization. Through a series of mergers and acquisitions, it has become the second largest bank in Switzerland and one of the largest banks in Europe. At the end of 2021, it had just over 50,000 employees and 1.6 trillion Swiss francs in assets under management. Credit Suisse has a domestic Swiss bank, plus operations in asset management, investment banking and asset management. The Swiss National Bank has designated it as one of Switzerland’s globally systemically important banks, whose bankruptcy would cause “significant damage to the Swiss economy and financial system”.
