Credit Suisse in the spotlight ahead of a change in strategy | Catch My Job

With just days to go before unveiling a major strategic overhaul, Credit Suisse is racing to boost sales of parts of its business that could reduce the amount of cash it may need from investors.

The Swiss lender is trying to recover from a series of scandals and lawsuits and could embark on a major overhaul to cut volatile investment banking to focus on wealth management.

Analysts estimate it could face a capital shortfall of up to 9 billion Swiss francs ($9.01 billion) — depending on what it does to shrink its investment bank and how much it raises from asset sales — to restructure, support growth and have safety cushion.

The group aims to calm the market with its restructuring plan, more details of which are expected with third-quarter results on October 27.

WHY IS CREDIT SUISSE IN THE LIGHT OF THE ACTION?

A series of losses, high-profile risk management failures and top management changes have put Switzerland’s second-biggest bank under scrutiny.

Credit Suisse had to raise capital, halt share buybacks, cut its dividend and overhaul management after losing more than $5 billion since the collapse of Archegos in March 2021, when it also had to suspend client funds linked to failed financier Greensill.

The spying scandal forced then-CEO Tidjane Thiam to resign in 2020, and the Swiss financial regulator said Credit Suisse had misled it about the extent of its oversight.

His successor, Thomas Gottstein, lasted until July 2022, when Credit Suisse tapped restructuring expert Ulrich Koerner as CEO and launched a second strategic review within a year.

Chairman Axel Lehmann took over from Antonio Horta-Ossori in January, who resigned for violating quarantine rules during the COVID-19 pandemic less than nine months after joining.

Horta-Osario’s predecessor, Urs Rohner, admitted when he left office last year that the bank had disappointed customers and shareholders, and not for the first time.

Credit Suisse’s losses reached almost 4 billion Swiss francs in the last three quarters alone, while financing costs rose due to a downgrade.

WHAT PROPERTY CAN SELL?

Credit Suisse has already said it wants to strengthen its wealth management business, shrink its investment bank into a “light equity and advisory” business and evaluate strategic options for its securitization business.

Last week, it sold an 8.6% stake in Allfunds Group for 334 million euros ($328.4 million). It also sold a 30% stake in Energi Infrastructure Partners for an undisclosed price.

Other assets said to be up for sale include a stake in SIKS Group, which runs the Zurich Stock Exchange, two specialist Swiss banks, Pfandbriefbank and Bank-Nov, and Swisscard, a joint venture with American Express.

Credit Suisse wants to sell the Savoy Hotel in downtown Zurich, which could be worth 400 million Swiss francs.

The bank’s U.S. asset management unit could fetch about $2 billion from the sale, the sources said, and is said to be attracting interest from money managers such as Janus, Blue Owl and others.

The bank is also considering spinning off part of its advisory and investment banking business, which could bring in outside investors and be called First Boston, the media reports.

WHAT OTHER FUNDRAISING OPTIONS ARE THERE?

The bank has approached investors for recapitalization, sources familiar with the matter said.

Credit Suisse is reported to have hired Morgan Stanley and Royal Bank of Canada to help arrange a capital increase to shore up its finances and provide restructuring funds.

Issuing convertible bonds is another way the Swiss bank is reportedly considering to help finance its turnaround plans. This could allow the bank to limit the sale of shares at discounted current prices.

As a last resort, Credit Suisse could seek 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 Swiss politician and businessmen Alfred Escher to finance the country’s railways and support industrialization.

Through a series of mergers and acquisitions, it became the second largest bank in Switzerland and one of the largest banks in Europe.

It had just over 50,000 employees and 1.6 trillion Swiss francs in assets under management at the end of 2021.

Credit Suisse has a domestic Swiss bank, plus asset management, investment banking and asset management operations.

The Swiss National Bank has designated it as one of Switzerland’s global systemically important banks, the failure of which would cause “significant damage to the Swiss economy and financial system.”