Credit Suisse turns to investors for multi-billion dollar make-or-break restructuring

  • Overhaul aims to restore confidence in banks
  • CEO says ‘we need to get this right’
  • Shares fell as much as 16%

ZURICH, Oct 27 (Reuters) – Credit Suisse (CSGN.S) plans to raise 4 billion Swiss francs ($4 billion) from investors, cut thousands of jobs and shift focus from investment banks to wealthy clients , as the bank tries to put years behind the scandal.

Chairman Axel Lehmann called the plan a “blueprint for success”, but it was flat with investors after the bank posted a surprise loss of 4 billion Swiss francs in the third quarter.

Its shares, which hit record lows in the past few weeks, fell 16 percent before cutting losses, valuing the bank at about 11 billion Swiss francs.

Analysts say many questions remain unanswered.

Goldman analysts wrote: “You’d think they had rushed (the news) this morning with a very incomplete plan,” but its “incredibly low” target would be beaten.

“Resolute execution and not making mistakes will be key, and it will take time to start showing results,” said Vontobel analyst Andreas Venditti.

Credit Suisse said the pace of customer withdrawals in recent weeks has allowed the bank to violate some liquidity regulatory requirements, underscoring the impact of wild market volatility and a social media storm.

The group said the process was stable throughout.

The transformation plan has many elements, from layoffs to a renewed focus on banking the wealthy.

It will cut 2,700 jobs, or 5% of its workforce, by the end of this year, and eventually reduce its workforce by about 9,000 to about 43,000 by the end of 2025.

The Swiss bank also intends to spin off its investment bank to create CS First Boston, which will focus on advisory work such as mergers and acquisitions and arranging capital markets transactions.

The bank plans to sell some of its shares but retain about 50 percent of the new business, a person familiar with the matter said. It is also exploring the possibility of an initial public offering.

Saudi influence

National Saudi Bank (SNB) (1180.SE), majority-owned by the Saudi government, said it would invest up to 1.5 billion Swiss francs in Credit Suisse, taking up to 9.9 percent of its shares and possibly invest in the investment bank.

The move bolstered Saudi influence in one of Switzerland’s most prominent banks. The Olayan Group is one of the largest family-owned conglomerates in Saudi Arabia with a multibillion-dollar portfolio and a 5% stake in the bank.

A clock is seen near the logo of Credit Suisse Bank on the Paradeplatz in Zurich, Switzerland, on October 5, 2022. REUTERS/Arnd Wiegmann/File Photo

Qatar Investment Authority, which owns about 5 percent of the Swiss bank, declined to comment on whether it planned to buy any shares.

It is disappointing that Credit Suisse has taken so long to follow rival UBS (UBSG.S)’s increased focus on wealth management while scaling back its investment banking business, said proxy adviser Ethos Foundation.

It criticized the bank for giving the SNB a large share at a bargain price, adding: “The scheme is dramatic for existing shareholders who will suffer a very significant dilution effect.”

Credit Suisse said it would set up a capital release unit to wind down non-strategic, high-risk businesses, while announcing plans to sell most of its securitized products business to an investment group led by Apollo.

The bank will also close some trading operations in emerging markets and equities.

Its big third-quarter loss was largely due to write-offs related to investment banking reforms, including adjustments to tax credit losses.

JPMorgan analysts said “question marks remain” about the restructuring of the investment banking business, adding that the stock sale would also weigh on stocks.

The shake-up, aimed at overcoming the worst crisis in the bank’s history, is the third attempt by successive chief executives in recent years to turn the group around.

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Once a symbol of Swiss reliability, the bank became notorious for scandals, including unprecedented prosecutions of money laundering against criminal gangs at home.

The bank has been pushing to sell assets to raise funds and free up capital in an attempt to limit how much cash it can raise from investors to fund its overhaul, deal with its legacy litigation costs and preserve a buffer for volatile markets ahead.

A string of costly and morale-damaging blunders at Credit Suisse sparked a massive change in management.

Risk management was highlighted last year when the bank suffered a $5.5 billion loss from the breakup of U.S. investment firm Archegos and had to freeze a $10 billion supply chain finance fund linked to insolvent British financier Greensill. ‘s mistakes.

Its growing problems even caught the attention of day traders earlier this month, when wild speculation about its health sent its shares to an all-time low.

(1 USD = 0.9858 CHF)

Additional reporting by Michael Shields in Zurich and Yousef Saba in Dubai; Writing by John O’Donnell; Editing by Edmund Klamann and Jane Merriman

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