EXCLUSIVE Credit Suisse assesses options to strengthen capital – sources

ZURICH, May 31 (Reuters) – Credit Suisse (CSGN.S) is in the early stages of evaluating options to bolster its capital after a series of losses eroded its financial reserves, two people told Reuters. knowing the case.

The size of the increase would likely exceed 1 billion Swiss francs ($1.04 billion), but that has yet to be determined, said one of the people, who declined to be named because deliberations are always internal.

The cash injection would help Switzerland’s second-biggest bank recover from billions in losses in 2021 and a series of costly legal headaches.

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Selling shares to some of its existing major investors is the preferred option, but Credit Suisse hasn’t ruled out appealing to all shareholders, the person said.

Selling a business, such as Credit Suisse’s asset management division, is also a possibility, the other person said. The bank has not yet decided on a potential action, they said. No transaction was planned for the second half of this year.

“Credit Suisse does not currently plan to raise additional capital,” the bank said in a statement.

“The Group is solidly capitalized with a CET1 ratio of 13.8% and a CET1 leverage ratio of 4.3%. Asset management is a key element of our group strategy presented last November, with four main divisions .”

The CET1 ratio is a key indicator of a bank’s financial strength.

Shares of Credit Suisse fell 4.2% at 10:00 GMT, against a 0.7% drop in the Swiss blue chip index (.SSMI) and 0.9% in the European banking index (. SX7P), following the Reuters report.

“The news, if confirmed, potentially indicates more pain than we currently expect,” Jefferies analysts wrote in a research note.

Jefferies analysts suggested the move could reflect earnings falling short of expectations or a contingency plan in case the revenue and cost environment doesn’t improve as expected in 2023.

A major Credit Suisse shareholder, Harris Associates, said it saw no need for the Swiss bank to raise new equity.

“Given the strength of their balance sheet today, we agree with the company’s statement that no further capital raising is required,” David Herro of Harris Associates told Reuters.

Harris Associates has a stake of about 5.2%, according to the bank’s website, making it the largest shareholder currently.


Credit Suisse is reeling from the billions in losses accumulated in 2021 due to failed investments, as well as the impact of several legal cases, including a court case in Bermuda that could cost around $600 million. Read more

The bank is trying to reform its risk management culture and turn the page on a series of scandals, which have prompted several waves of management reshuffles, abrupt departures and internal and external investigations.

The bank’s shares have fallen by more than a fifth in the past year.

Both Fitch and Standard & Poor’s downgraded Credit Suisse’s credit rating this month. Read more

One of the sources said the annual rating of major Swiss banks by Swiss financial watchdog FINMA had scored Credit Suisse at 4, unchanged from last year, the lowest rating possible.

One of the watchdog’s main concerns was capitalization at the group level, the source said.

FINMA declined to comment.

Deliberations on a capital increase come just a year after the Swiss bank raised about 1.75 billion Swiss francs from investors via convertible bonds. Read more

In April, Credit Suisse downplayed the need for fresh capital even as it reported a first-quarter loss that intensified its financial woes. Read more

Credit Suisse executives said at the time that capital could remain constrained over the next six months as the bank continues to spend heavily on compliance and risk, but a source familiar with the matter said that A capital increase was not envisaged at the time.

The bank’s core capital ratio weakened to 13.8% at the end of the first quarter of 2022 from 14.4% at the end of 2021.

But a further capital increase would strengthen Credit Suisse’s balance sheet and also send a positive signal. If well-known investors brought fresh cash to the bank, it could be seen as a sign of confidence, one of the sources said.

($1 = 0.9586 Swiss francs)

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Reporting by Oliver Hirt; additional reporting by Simon Jessop; Editing by Jane Merriman

Our standards: The Thomson Reuters Trust Principles.

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