Zurich According to insiders, the major Swiss bank Credit Suisse is examining measures to strengthen capital. The considerations are at an early stage, two people familiar with the situation told Reuters. One option is a capital increase. Such a transaction would probably take place in the second half of the year.
The volume is not yet certain, but should exceed the threshold of one billion francs, said one of the people. The focus is on tapping into existing major shareholders. With a capital increase, the bank not only wants to pad the balance sheet, but also send a positive signal to the outside world. Because if well-known investors gave the bank fresh capital, that could be seen as a vote of confidence.
Credit Suisse has made headlines over the past two and a half years with a string of failures. The collapse of the Archegos hedge fund alone cost the bank around five billion francs in 2021. But the rest of the business is also showing signs of slowing down, in the first quarter earnings collapsed by 42 percent, and the bottom line was again in the red with a loss of CHF 273 million. By the end of March, the core capital ratio had fallen to 13.8 percent from 14.4 percent at the end of 2021, falling short of the 14 percent target for 2024. The higher this rate, the more capital a bank has.
“Credit Suisse is currently not considering raising additional equity,” the bank said. With a core capital ratio of 13.8 percent and a debt ratio (leverage ratio) of 4.3 percent, the group is solidly capitalized.
Top jobs of the day
Find the best jobs now and
be notified by email.
Ongoing monitoring by Finma
The Swiss financial market supervisory authority also does not give the institute good marks, as one of the people said. In the annual “Assessment Letter”, the authority gave the bank the lowest grade of four. This means that Finma monitors the bank intensively and continuously. Among other things, the authority is concerned about capitalization at group level. Finma declined to comment. Credit Suisse lost more than a fifth of its stock market value last year.
A decision to strengthen the capital has not yet been made, the people said. Possible alternatives to a capital increase are a division sale or the reallocation of capital from the partially comfortably equipped subsidiaries into the group. However, Credit Suisse said asset management was an essential part of the group strategy presented last November.
The rating agencies Standard & Poor’s (S&P) and Fitch recently downgraded Credit Suisse, citing, among other things, its weak operating profitability compared to the competition. A low rating usually makes the bank’s financing more expensive.
According to one of the insiders, another uncertainty factor is the appointment of a new head of law as of July 1. It cannot be ruled out that Markus Diethelm could seek faster settlements than his predecessor in pending legal cases. However, this would cost money again and could add to the capital ratio.
Following the Archegos debacle last year, CEO Thomas Gottstein had already collected around CHF 1.75 billion via two mandatory convertible bonds. Gottstein’s predecessor, Tidjane Thiam, raised around CHF 10 billion in two capital increases during his tenure.
More: Credit Suisse shareholders give the management a lesson – but the big revolt does not materialize