ZURICH, Oct 27 (Reuters) – Credit Suisse plans to raise 4 billion Swiss francs ($4 billion) from investors, cut thousands of jobs and shift its focus from investment banking to clients rich, while the bank tries to put years of scandals behind this.
The Swiss lender on Thursday described what its chairman Axel Lehmann called a “model of success”, after posting an unexpected loss of 4 billion Swiss francs in the third quarter of the year.
The announcement follows torrid weeks for the bank and falls flat with investors. Its stock, which has hit record highs in recent weeks, fell around 14% in early trading, valuing the beleaguered bank at around 11 billion francs.
Credit Suisse said its customers have withdrawn funds in recent weeks at a pace that has seen the lender breach some regulatory liquidity requirements, pointing to the impact on its business of wild market swings and a storm on social networks.
The group added that he was stable throughout.
Analysts gave a mixed reception to this announcement. Vontobel’s Andreas Venditti said the bank was embarking on a “long process to restore its credibility”.
“Resolute execution and no further missteps will be key and it will take time before results start to show,” he said.
The recovery plan has many elements, from cutting jobs to refocusing on banking for the wealthy.
It will cut 2,700 jobs or 5% of its workforce by the end of this year, and eventually reduce its workforce from around 9,000 to around 43,000 by the end of 2025.
The Swiss bank said it also aimed to spin off its investment bank to create CS First Boston, focused on advisory activities such as mergers and acquisitions and arranging capital markets transactions.
The bank plans to sell a stake but retain around 50% in the new venture, a person familiar with the matter said. It is also exploring the possibility of an IPO, another source familiar with the matter said.
The Saudi National Bank, majority-owned by the Saudi government, said it would invest up to 1.5 billion francs in Credit Suisse to take a stake of up to 9.9% and may invest in the investment bank.
This decision strengthens the Saudi influence in one of the best known banks in Switzerland. Olayan Group, one of Saudi Arabia’s largest family-owned conglomerates with a multi-billion dollar investment portfolio, also has a 5% stake in the bank.
The Qatar Investment Authority – which owns around 5% of the Swiss bank – declined to say whether it planned to buy shares.
Credit Suisse said it would create a capital release unit to end non-strategic and high-risk business, while announcing plans to sell a large portion of its securitized products business to a directed group of investors. by Apollo.
The bank will also end some trading activities in emerging markets and equities.
Its heavy loss in the third quarter was largely due to write-offs related to its investment banking overhaul, including adjustments for lost tax credits.
JPMorgan analysts said “question marks remain” over the investment bank’s restructuring, adding that the stock sale would also weigh on the stock.
The latest overhaul, aimed at overcoming the bank’s worst crisis in its history, is the third attempt in recent years by successive CEOs to turn the group around.
Once a symbol of Swiss reliability, the bank’s reputation has been tarnished by a series of scandals, including an unprecedented lawsuit in the country involving money laundering for a criminal gang.
The bank had been scrambling to raise funds and free up capital by selling assets, keen to limit the amount of cash it would need to raise from investors to fund its overhaul, manage its legacy litigation costs and retain a cushion. for the tough markets ahead.
Credit Suisse needs to reorganize after a series of costly and morale-sapping gaffes sparked a dramatic change in leadership.
In refocusing from risky investment banking to banking for the world’s rich, Credit Suisse is following in the footsteps of its biggest Swiss rival, UBS.
UBS’s turnaround was successful largely thanks to a flood of freshly printed money from the world’s central banks to revive the economy during the financial crisis.
Credit Suisse, meanwhile, is trying to refocus its business in a world facing war, an energy crisis, runaway inflation and economic slide.
Last year, the bank suffered a $5.5 billion loss following the breakup of US investment firm Archegos and had to freeze $10 billion in supply chain finance funds linked to the financier. British insolvent Greensill, pointing out failings in risk management.
His mounting problems even put him on the radar of day traders earlier this month, when a frenzy of wild speculation about his health sent his stock price crashing to an all-time low.
($1 = 0.9858 Swiss francs)
Additional reporting by Michael Shields in Zurich and Yousef Saba in Dubai; Written by John O’Donnell; Editing by Edmund Klamann
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