Exclusive: Credit Suisse sounds out investors about capital hike – sources

The logo of the Swiss bank Credit Suisse is seen in an office building in Zurich, Switzerland, Sept. 2, 2022. REUTERS/Arnd Wiegmann

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ZURRICH, Sept. 23 (Reuters) – Credit Suisse is polling investors for fresh money, two people familiar with the matter said, and is approaching them for the fourth time in about seven years as it tries to radically overhaul its investment bank.

The Swiss bank has been talking to investors about the move in recent weeks, people said. Several scenarios are discussed for the investment bank, including the most drastic option of largely exiting the US market, two sources said.

It’s unclear how eager investors are and interest may be dampened by the fact that Switzerland’s second-largest bank, struggling after a string of scandals, has had nearly 12 billion francs ($12.22 billion) in capital since 2015. has collected – almost equal to its current market value.

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The sources said no decisions were made, and did not specify how much money the bank would like to raise.

Credit Suisse shares fell a whopping 8.3% in early trading on Friday, reaching their all-time low. read more

“With a possible sale of the unit (securitised products) and the reduction of risk in the balance sheet, up to 4 billion Swiss francs are missing for the upcoming restructuring, the growth plans in asset management and for building equity,” ZKB analyst said. Christian Schmidiger.

With a market capitalization of about 12.3 billion Swiss francs, this would mean “significant dilution for existing shareholders,” Schmidiger added in a research note.

A spokesperson for Credit Suisse (CSGN.S) said: “We said we will update on the progress of our comprehensive strategy review when we announce our third quarter results. It would be premature to comment on potential Results.”

The spokesperson added: “Credit Suisse is not exiting the US market.”

In addition to investment banking, Credit Suisse’s activities in the United States also include asset management.

Bloomberg separately reported that Credit Suisse is considering the sale of its LatAm Wealth business excluding Brazil.

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The bank’s quarterly results are expected on October 27.

Last year, Credit Suisse was fined for arranging a fraudulent loan to Mozambique, hit by the collapse of Archegos, tainted by its involvement with late financier Greensill Capital and reprimanded by regulators for spying on its executives.

Under a restructuring launched by chairman Axel Lehmann, the bank is considering downsizing its investment bank to focus even more on its flagship asset management business.

The bank announced its second strategy overhaul in a year, replacing its CEO in July, bringing in restructuring expert Ulrich Koerner to scale back investment banking and cut more than $1 billion in costs. read more

In the past three quarters alone, losses have amounted to nearly 4 billion Swiss francs. Given the uncertainties, the bank’s financing costs have increased. Deutsche Bank analysts estimate a capital shortfall of at least 4 billion francs in August.

The sale of the securitization of mortgages and other loans, as already indicated, could partially cover this.

There is significant interest in this company, according to sources, including from financial investors, other banks and insurers. The company is profitable, but also capital intensive. An expert estimated it to be worth $1 billion-2.5 billion.

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In addition, other smaller companies could be sold.

One of the sources who spoke to Reuters said it will likely be difficult to avoid a capital increase. However, the major investors with whom the bank is in talks have high requirements for participating in a capital increase.

Opinions differ among members of the board of directors who will ultimately decide on the strategy as to how drastic the cut in investment banking should be.

If the bank largely abandoned US investment banking, certain areas critical to its core millionaires and billionaires business would shift to other parts of the bank.

Credit Suisse is also considering cutting about 5,000 jobs, about one in 10, as part of its drive to cut costs. read more

($1 = 0.9762 Swiss Franc)

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Additional reporting by Pamela Barbaglia in London and Megan Davies in New York; Written by Michael Shields and John O’Donnell; Editing by Elisa Martinuzzi, Edmund Blair, Jan Harvey and Alexander Smith

Our Standards: The Thomson Reuters Trust Principles.

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