Credit Suisse has revealed plans to raise 4 billion Swiss francs ($4 billion) from investors, cut thousands of workers, and redirect its attention away from investment banking and onto wealthy clients.
Credit Suisse Reportedly Plans To Raise 4 Billion Swiss Francs In Capital!
Even though Chairman Axel Lehmann praised the plan as a “blueprint for success,” investors were disappointed after the bank’s unexpected loss of 4 billion Swiss francs in the third quarter.
In recent weeks, the bank’s stock price hit record lows, and it was down as much as 16% before regaining some of those losses. According to the experts, there are still a lot of queries that have not been answered.
Even though the company’s “improbably modest” goals would be surpassed, a group of analysts from Goldman Sachs concluded that “You come away with the feeling that they were forced into presenting (the news) this morning with a poorly incomplete plan.”
An analyst at Vontobel named Andreas Venditti underlined the need to be persistent in one’s efforts and avoid making any more mistakes in the future.
The fact that customers withdrew funds from Credit Suisse at a pace that led the company to breach specific liquidity standards was brought to light because the situation illustrates the impact of substantial market fluctuations and a social media storm.
The Results Of The Poll Indicated That There Were No Significant Shifts At Any Time
The recovery strategy consists of various actions, such as laying off employees and shifting the focus to banking for the wealthy.
By the end of the year, there will be a reduction of 2,700 jobs, equivalent to 5% of the workforce. By the end of 2025, there will be an additional decrease of around 9,000 posts, bringing the total number of employees to approximately 43,000.
In addition, the Swiss financial institution intends to separate its investment banking operations into a new entity known as CS First Boston. This new organization will focus on mergers and acquisitions and capital market deal-making as its primary areas of expertise.
An insider reported that the bank intends to sell a minority shareholding in the new firm but would keep around half of it. In addition to this, the company is contemplating going public.
The Influence Exercised By The Sauds
The Saudi National Bank (SNB) (1180. SE), which the Saudi government controls, has revealed that it intends to invest in Credit Suisse of up to 1.5 billion Swiss francs, which would give it a stake of up to 9.9% of the company.
It increases Saudi Arabia’s influence inside a key financial institution in Switzerland. The Olayan Group manages investments with a combined value of billions of dollars.
It is one of the biggest privately held companies in Saudi Arabia and is also the owner of a five percent stake in the bank.
The Qatar Investment Authority did not respond when asked if it plans to acquire further shares in the Swiss bank, even though it currently owns around 5 percent of the bank.
A proxy adviser known as Ethos Foundation expressed surprise that Credit Suisse had waited such a long time to follow the example set by a rival known as UBS, which had moved its focus to wealth management while decreasing its involvement in investment banking.
The bank came under fire for selling SNB a controlling position at a price that was seen to be too low. In response, the bank issued a statement that said, “This proposal is dramatic for the existing shareholders who would suffer a very severe dilution effect.”
Credit Suisse has announced that it would sell a significant chunk of its securitized products business to an investor group led by Apollo. In addition, the company plans to form a capital release unit to wind down non-strategic activities that involve greater risk.
- Some of the bank’s trading activities, especially those that deal with equities and emerging markets, will be discontinued soon. Its enormous loss for the third quarter was mostly caused by write-offs and other expenses connected to the company’s investment banking overhaul, such as adjustments for missing tax advantages.
- JPMorgan analysts pointed out that there were still “question marks” over the restructuring of investment banking and that the sale of shares would have an additional influence on the stock.
- To recover from the most significant crisis in its history, the bank is making this its third major attempt in as many years.
- The bank, which was previously seen as a symbol of Switzerland‘s trustworthiness, has been tarnished by scandals, such as a rare conviction inside the country for money laundering on behalf of a criminal organization.
- The bank has been attempting to decrease the amount of money it would need to raise from investors by selling assets to pay for its transformation, settle previous claims, and create a buffer should market circumstances become particularly severe.
After a string of errors that were both financially damaging and detrimental to employees’ morale, Credit Suisse’s leadership team underwent a comprehensive overhaul.
The bank was forced to put $10 billion in supply chain financing funds on hold owing to the bankruptcy of British financier Greensill, which resulted in a loss of $5.5 billion due to the failure of the American investment business Archegos that occurred the previous year.