The crisis-ridden second largest Swiss bank Credit Suisse (CS) has made some progress with its rescue plan. At an extraordinary general meeting on Wednesday, more than 90 percent of shareholders voted in favor of the planned capital increase, as the bank announced. But the market environment remained bleak.
After the announcement of massive outflows of funds and another loss of billions, the price of CS paper fell significantly and at times approached the record low of 3.52 francs (3.52 euros) from early October before recovering slightly.
In October, investors expressed concern that CS could pull the financial markets into a downward spiral like Lehman Brothers once did. However, analysts dismissed this as unfounded.
Fifth quarterly loss in a row
The expected fourth-quarter pre-tax loss of CHF 1.5 billion is the fifth consecutive quarterly loss and more than analysts had expected. The bank has apparently not yet succeeded in stabilizing its business, commented analyst Kian Abouhossein from JPMorgan.
At least the desired capital increase is sealed. In addition to a subscription rights offer for existing shareholders, the Saudi National Bank (SNB) from Saudi Arabia is also investing around CHF 1.5 billion. In total, the new shares should bring four billion francs into the coffers in order to implement the transformation plan from the end of October. The bank wants to get out of the crisis after costly wrong decisions and billions in losses.
The market value slid deep into the basement
The bank has been battered by scandals, lawsuits and debacles. In 2019, she made headlines with a spy affair in which a retiring employee was shadowed in gangster fashion on the streets of Zurich. Convictions followed, among other things, for a corruption scandal in Mozambique and unstoppable money laundering by a Bulgarian mafia. In 2021 came the multi-billion dollar collapse of the Archegos hedge fund and the liquidation of the Greensill funds. This year there have been negative headlines about possible CS accounts held by criminals and corrupt heads of state. The market value was 45 billion francs in 2017, this year it slipped to ten billion francs at times.
CS now wants to sell off part of the investment banking and concentrate primarily on the Swiss business as well as asset management and asset management, for example of pension fund assets. 9,000 of the approximately 52,000 jobs are to disappear, largely through the spin-off of part of the investment banking business.
The bank plans to sell a significant portion of its capital-intensive securitized products business, which converts loans into securities. A framework agreement has already been concluded with a consortium around the private equity company Apollo. In addition, the capital markets and consulting business is to be spun off into the new CS First Boston unit over the next three years.
Focus on strategic priorities
“The result of the vote confirms the confidence in our strategy, which we presented in October,” the bank quoted the Chairman of the Board of Directors, Axel Lehmann, as saying. “We are fully focused on executing our strategic priorities to lay the foundation for future profitable growth.”
The Saudi National Bank will hold a stake of almost ten percent in CS. The Ethos Foundation as a shareholder was against the participation because of the human rights situation in Saudi Arabia, but did not find a majority. SNB Chairman Ammar al-Khudairy previously spoke of “excellent return potential” in an interview with Bloomberg. The SNB will be one of the largest shareholders alongside the US fund company Harris Associates, ahead of the Qatari investment fund QIA.
