Zurich, Oct 27 (AFP\/APP):Credit Suisse unveiled radical measures Thursday aimed at turning around the beleaguered bank following huge third quarter losses, including revamping its investment banking, slashing 9,000 jobs and a capital injection from the Saudi National Bank.<\/p>\n
Switzerland’s second-biggest bank launched a new strategy intended to repair the damage following a series of scandals, saying it wanted to create “a simpler, more focused and more stable bank”.<\/p>\n
“We all know Credit Suisse is at a critical point in its history,” chairman Axel Lehmann said.<\/p>\n
For months, if not years, it has been “overshadowed by various issues”,
\nwhile he acknowleged that the 166-year-old institution had become unfocused.<\/p>\n
“We need to draw a line,” he insisted.<\/p>\n
Lehmann said the reassessment of the bank’s direction included “a radical strategy and a plan to create a stronger, more resilient and more efficient bank with a firm foundation”.<\/p>\n
The revamp came as Credit Suisse unveiled a third quarter net loss of 4.034 billion Swiss francs ($4.07 billion).<\/p>\n
The Zurich-based bank revealed it was going for a “radical restructuring” of its investment bank, an accelerated cost-cutting effort, and strengthened and reallocated capital, “all of which are designed to create a new Credit Suisse”.<\/p>\n
The group’s shares slid on the announcements, closing down 18.6 percent on the Swiss stock exchange’s main SMI index at 3.877 Swiss francs.<\/p>\n
“The reaction is negative, which is not good. I think the markets were expecting more drastic things,” Carlo Lombardini, a professor of banking law at the University of Lausanne, told AFP.<\/p>\n
“The bank is not going to go bankrupt… but the question is how it will generate income in a difficult market”.<\/p>\n
– Saudi investment –<\/p>\n
The bank intends to raise capital worth four billion Swiss francs ($4 billion) through issuing new shares to qualified investors, including Saudi National Bank, which has committed to invest up to 1.5 billion Swiss francs.<\/p>\n
The Saudi bank will thus take a stake of up to 9.9 percent, becoming a chief shareholder alongside the US company Harris Associates (10.05 percent) and the sovereign wealth fund of Qatar (5.03 percent).<\/p>\n
Making a capital increase is a “fairly radical choice”, said David Benamou, director of investments at Axiom Alternative Investments.
\nHe told AFP it was a “very good message” for customers and creditors.<\/p>\n
The Ethos foundation, which represents pension funds in Switzerland, welcomed that bank “finally seems to have understood that it was necessary to stop the investment banking”.<\/p>\n
– ‘Lengthy process’ –<\/p>\n
Credit Suisse said it expects staff numbers to drop by 9,000 to approximately 43,000 staff by the end of 2025.<\/p>\n
The group will also reduce its cost base by 15 percent, or around 2.5 billion Swiss francs, delivering a cost base of around 14.5 billion Swiss francs in 2025.<\/p>\n
Credit Suisse will refocus on its most stable activities — wealth management and Swiss banking — and reduce its merchant banking.<\/p>\n
It will revive its First Boston brand, named after an US investment bank it absorbed in 1990, where its capital market and advisory activities will be brought together.<\/p>\n
Andreas Venditti, an analyst at Swiss investment managers Vontobel, said Koerner’s new strategic plan was “just the first step in a lengthy process to restore credibility and regain the trust” of Credit Suisse’s stakeholders.<\/p>\n
“Resolute execution and no further mis-steps will be key and it will take time until results will begin to show,” he said.<\/p>\n
Analysts at the US investment bank Jefferies said the capital raise was “larger than we thought it would be, and third quarter results show another quarter-on-quarter deterioration in momentum that we find concerning, though not very surprising”.<\/p>\n
– Archegos, Greensill shocks –<\/p>\n
Credit Suisse’s capital-guzzling investment banking arm has been the source of heavy losses which plunged Credit Suisse’s accounts into the red — eclipsing its more stable activities such as wealth management or its Swiss domestic banking services.<\/p>\n
Credit Suisse’s investment bank suffered a loss of 3.7 billion Swiss francs in 2021 and backed that up with a 992 million Swiss franc loss in the first half of 2022.<\/p>\n
It was hit by the implosion of US fund Archegos, which cost Credit Suisse more than $5 billion.<\/p>\n
Meanwhile its asset management branch was rocked by the bankruptcy of British financial firm Greensill, in which some $10 billion had been committed through four funds.<\/p>\n
Credit Suisse is one of 30 banks globally deemed too big to fail, forcing it to set aside more cash to weather a crisis.<\/p>\n
While many industry experts think a bankruptcy highly improbable, these rumours helped drag its share price down to a low of 3.158 Swiss francs on October 3.<\/p>\n","protected":false},"excerpt":{"rendered":"
Zurich, Oct 27 (AFP\/APP):Credit Suisse unveiled radical measures Thursday aimed at turning around the beleaguered bank following huge third quarter losses, including revamping its investment banking, slashing 9,000 jobs and a capital injection from the Saudi National Bank. Switzerland’s second-biggest bank launched a new strategy […]<\/p>\n
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