Zurich Credit Suisse shareholders have granted the bank a capital injection of four billion Swiss francs. At an extraordinary general meeting on Wednesday, they cleared the way for two capital increases.
A block of shares with a volume of CHF 1.5 billion is to be placed privately. The Saudi bank SNB has announced that it will subscribe to these shares. This makes it one of the most powerful shareholders. Another block of shares will be offered to existing and new shareholders on the open market. Both capital increases were waved through with over 90 percent approval.
Chairman of the Board of Directors, Axel Lehmann, said: “The outcome of today’s shareholder vote is another important step in building the new Credit Suisse.” for future profitable growth.”
Outflows of funds scare investors away
A new profit warning issued by Credit Suisse in the run-up to the shareholders’ meeting on Wednesday showed just how urgently the fresh capital is needed. Accordingly, the money house expects a deficit of up to CHF 1.5 billion before taxes in the period from October to December.
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The bank had already set investors for a fourth-quarter loss. However, the magnitude surprised the markets. The stock fell more than 6 percent on Wednesday morning. The bank had already posted a loss of four billion francs in the third quarter.
What scared many investors: Credit Suisse is struggling with high cash outflows in its core business, wealth management. Since the end of September, the bank’s assets under management have shrunk by ten percent, Credit Suisse said. This ensures less net interest income and a lower recurring commission and fee income.
In the first two weeks of October alone, customers had withdrawn six percent of their invested assets. Credit Suisse even had to tap its liquidity reserve for a short time in order to service the account terminations.
This trend has slowed since mid-October, but has not yet stopped completely, the bank said. After all: In the Swiss business, the assets under management have largely stabilized.
Andreas Venditti, analyst at Vontobel, describes the development as “deeply worrying”. He said: “Credit Suisse needs to restore confidence as soon as possible – but that’s easier said than done.”
High price for strategic uncertainty
JP Morgan analyst Kian Abouhossein wrote in a recent study that he was “perplexed” by the massive expected losses in investment banking. The bank is “not yet out of the woods when it comes to stabilizing the brand”.
The bank is paying a high price for its decision to allow three months for the development of the new strategy under CEO Ulrich Körner, who has been in office since the end of June.
While the top management around CEO Ulrich Körner was fine-tuning the new strategy, rumors of an impending collapse of the bank suddenly began to spread in social media at the beginning of October.
The stock seemed to plummet on those smells alone – and even credit default swaps for bonds from Credit Suisse rose in price rapidly. This caused uncertainty among customers worldwide – but particularly so in Asia.
Since Körner presented his new corporate strategy and extensive savings programs at the end of October, the nervousness has subsided. On Wednesday, the bank confirmed its goal of achieving an equity ratio of 13.5 percent by the end of the year.
But the corporate restructuring and job cuts amounting to five percent of the workforce devour a lot of money. In addition, there is a risk of further depreciation on the value of property or software, the money house warned.
Since the beginning of 2021, the bank has been trying to leave the scandals of the past behind with ever new strategic adjustments. The process cost numerous top managers and board members their jobs.
CEO Körner has expected the bank to make the biggest cuts so far. He wants to save up to 9,000 of the 52,000 jobs. In addition, Credit Suisse has announced that it will spin off and sell large parts of its investment banking business. The reduction of risks and a focus on asset management should bring about the turnaround.
More: “Historical moment”: Credit Suisse reports billions in losses and radical restructuring