EXCLUSIVE-Credit Suisse polls investors on capital increase – sources

EXCLUSIVE-Credit Suisse polls investors on capital increase – sources

By Oliver Hart

ZURICH, Sept 23 (Reuters) – Credit Suisse is canvassing investors for new funds, according to two people familiar with the matter, turning to it for the fourth time in about seven years, as it moves to a radical restructuring of its bank. investment.

In recent weeks, the Swiss bank has started talking to investors about this move, according to the people quoted. Various scenarios are being discussed for the investment bank, including the more drastic option of a large exit from the US market, two sources said.

It’s unclear how interested investors are, and motivation may be tempered by the fact that Switzerland’s second-largest bank, which has struggled following a series of scandals, has raised almost 12 billion francs ($12.22 billion) in capital since 2015, almost the equivalent of its current market value.

The sources said no decision has been made and they did not give details on how much cash the bank would seek to raise.

Credit Suisse shares fell 8.3% in early trading on Friday, hitting their lowest level on record.

“With a possible sale of the unit (of securitized products) and the reduction of risks on the balance sheet, up to 4 billion Swiss francs are missing for the next restructuring, growth plans in wealth management and for the accumulation of equity capital “, said ZKB analyst Christian Schmidiger.

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

A Credit Suisse spokesman said: “We have said we will update the progress of our global strategic review when we announce our third quarter results. It would be premature to comment on any potential results before then.”

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

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Beyond the investment bank, Credit Suisse’s US operations include asset management.

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

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

Last year, Credit Suisse was fined for arranging a fraudulent loan to Mozambique, hit by the collapse of Archegos, tarnished by its stake in defunct financier Greensill Capital and reprimanded by regulators for spying on its executives.

As part of a restructuring launched by its chairman, Axel Lehmann, the bank plans to downsize its investment bank to focus even more on its flagship wealth management business.

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

In the last three quarters alone, losses have totaled almost 4 billion Swiss francs. Given the uncertainty, the bank’s financing costs have skyrocketed. Deutsche Bank analysts in August estimated a capital shortfall of at least 4 billion francs.

The sale of its mortgage securitization business and other loans could cover part of it.

There is great interest in this business, according to sources, including from financial investors, other banks and insurers. The business is profitable, but it also requires a lot of capital. One expert estimated its value at $1-2.5 billion.

In addition, other smaller businesses could be sold.

One of the sources who spoke to Reuters said avoiding a capital increase would be difficult. However, the main investors with whom the bank is in talks are raising tough demands to participate in a capital increase.

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Among the members of the board of directors who will ultimately decide the strategy, opinions differ on how radical the cut in investment banking should be.

If the bank were to largely exit US investment banking, certain key areas for core business with millionaires and billionaires would shift to other parts of the bank.

Credit Suisse is also considering cutting some 5,000 jobs, roughly one in ten, as part of the cost-cutting drive.

(1 US dollar = 0.9762 Swiss francs)

(Additional reporting by Pamela Barbaglia in London and Megan Davies in New York; writing by Michael Shields and John O’Donnell; editing in Spanish by BenjamΓ­n MejΓ­as Valencia)

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