Finance

Credit Suisse reduces its debt to calm investor fears

Credit Suisse reduces its debt to calm investor fears

By John Revill

ZURICH, Oct 7 (Reuters) – Credit Suisse will buy back up to 3 billion Swiss francs ($3 billion) of debt, the troubled Swiss bank said on Friday, making a show of force as it seeks to reassure investors after a week tumultuous

The move cuts the bank’s debts and is an attempt to bolster confidence after sharp declines in its stock price and bonds. Unfounded rumors that his future was in doubt have circulated on social media amid concerns that he may need to raise billions of francs of new capital.

Credit Suisse, one of Europe’s biggest banks, is embarking on a sea change after losing more than $5 billion from the collapse of investment firm Archegos last year, when it also had to suspend linked client funds. to the failed financier Greensill.

Bank executives spent the past weekend reassuring big customers and investors about its financial strength, trying to dispel speculation about its future.

CEO Ulrich Kรถrner also told staff in a memo that he has sufficient capital and liquidity.

However, his words only fueled rumors about the bank as a social media storm gathered speed, triggering a sell-off in its shares.

The bank said the debt buyback “would allow us to take advantage of market conditions to buy back debt at attractive prices.”

Investors cheered. Credit Suisse shares gained as much as 3% in early trading on Friday, while the price of its euro-denominated bonds rose.

“It’s an opportunistic move to take advantage of market conditions that could be reassuring to some investors,” said Vontobel analyst Andreas Venditti. “If you buy below par, you make a profit that will slightly increase your capital.”

PROBLEMATIC CHAPTER

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Earlier this week, in an unusual step, the Swiss National Bank, which oversees the financial stability of systemically important banks in Switzerland, said it was monitoring Credit Suisse’s situation.

Banks are considered systemically important if their failure could undermine the Swiss economy and financial system.

The move is reminiscent of Deutsche Bank’s multi-billion euro debt buyback in 2016, when it faced a similar crisis and doubts about its future.

Dixit Joshi, a former Deutsche executive, has recently joined Credit Suisse as chief financial officer.

Zรผrcher Kantonalbank (Cantonal Bank of Zurich, in Spanish) said that the bonds are currently trading at a deep discount, allowing Credit Suisse to cut debt at a low cost. Analyst Christian Schmidiger said the move was also a “sign that Credit Suisse has enough liquidity.”

Credit Suisse said it was making a โ‚ฌ1 billion cash purchase offer for eight euro or sterling-denominated senior debt securities and another offer to repurchase 12 U.S. dollar-denominated senior debt securities for a maximum of โ‚ฌ2,000. millions of dollars.

The developments came after sources recently told Reuters that Credit Suisse was canvassing investors for new cash, approaching them for the fourth time in about seven years.

Under a restructuring launched by chairman Axel Lehmann, the bank plans to downsize its investment unit to focus even more on its flagship wealth management business. Above all, he hopes to close a troublesome chapter for the bank and repair its reputation.

In the last three quarters alone, losses have totaled nearly 4 billion Swiss francs. Given the uncertainty, the bank’s financing costs have skyrocketed.

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The bank is due to present its new business strategy on October 27, when it announces third-quarter results.

Rating agency Moody’s Investors Service expects Credit Suisse’s losses to rise to $3 billion by the end of the year, Moody’s lead analyst on the bank told Reuters on Thursday.

The bank has also said that it is studying the possibility of selling its luxury Savoy hotel, one of the best known in Zurich.

(1 US dollar = 0.9897 Swiss francs)

(Written by John Revill and John O’Donnell; additional reporting by Amanda Cooper in London; Spanish editing by Benjamรญn Mejรญas Valencia)

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