by Oliver Hurt
ZURICH (Reuters) – Credit Suisse is hunting investors for fresh liquidity, approaching them for the fourth time in nearly seven years as it attempts to fundamentally overhaul its investment bank, two people familiar with the matter said.
People said that in recent weeks the Swiss bank has started talking to investors about the move. Two sources said different scenarios are under discussion for the investment bank, including the riskiest option to largely exit the US market.
It is unclear how keen investors are and the interest that may be dwarfed by the fact that Switzerland’s second-largest bank, which has struggled after a series of scandals, has raised nearly 12 billion francs ($12.22 billion) in capital since 2015 – roughly the equivalent of its own. . The current market value.
The sources said that no decisions were taken and did not clarify the amount of liquidity that the bank will seek to collect.
Credit Suisse shares fell as much as 8.3% in early trading Friday, hitting an all-time low.
“With the potential for a unit sale (securitized products) and reduced balance sheet risk, there are up to CHF4 billion missing for upcoming restructuring, wealth management growth plans and equity capital accumulation,” said Christian Schmidger, an analyst at ZKB.
With a market capitalization of about 12.3 billion Swiss francs, this means “significant dilution for existing shareholders,” Schmidger added in a research note.
A Credit Suisse spokesperson said: “We said we will update the progress of our comprehensive strategy review when we report our third-quarter earnings. It would be too early to comment on any potential results before then.”
“Credit Suisse will not exit the US market,” the spokesman added.
Besides the investment bank, Credit Suisse’s US operations include asset management.
Bloomberg separately reported that Credit Suisse is considering selling the LatAm Wealth business except for Brazil.
The bank’s quarterly results are due on October 27.
Last year, Credit Suisse was fined for arranging a fraudulent loan to Mozambique, which has been battered by the collapse of Archegos and vilified over its involvement with defunct financier Greensill Capital, and reprimanded by regulators for spying on its executives.
Under the restructuring initiated by Chairman Axel Lehmann, the bank envisions downsizing its investment bank to focus more on its core wealth management business.
The bank announced its second strategy review in a year and replaced its chief executive in July, hiring restructuring expert Ulrich Koerner to scale back investment banking and cut costs by more than $1 billion.
Over the past three quarters alone, losses have increased nearly CHF4 billion. Given the skepticism, the bank’s financing costs soared. German Bank (ETR): Analysts in August estimated the capital shortfall at at least CHF4 billion.
The sale of its business of securitizing mortgages and other loans, as already indicated, could cover part of this.
The sources said that there is great interest in this business, including from financial investors, other banks and insurance companies. The business is profitable, but it is also capital intensive. One expert estimated it was worth $1 billion – $2.5 billion.
In addition, other small businesses can be sold.
One of the sources who spoke to Reuters said avoiding a capital increase would likely be difficult. However, the major investors with whom the bank is in talks are making tough demands to participate in the capital increase.
Among the board members who will ultimately decide the strategy, opinions differ about how drastic the cut will be in investment banking.
If the bank were to largely exit American investment banking, some of the key areas of core business with millionaires and billionaires would shift to other parts of the bank.
Credit Suisse is also considering cutting about 5,000 jobs, about 1 in 10, as part of a cost-cutting drive.
(dollar = 0.9762 Swiss francs)