Mon, Oct 10, 2022 page12

• Embattled Credit Suisse set to remodel

  • AFP, ZURICH
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  Battered by a series of scandals, rumors of financial trouble and plunging shares, Credit Suisse Group AG is preparing “transformation plans” to restore confidence in the Swiss banking giant.

  Ulrich Koerner, who took over as CEO in August, is due to present the strategic review on Oct. 27.

  With Switzerland’s second-largest bank refraining from revealing its intentions, speculation about its incoming strategy has been swirling.

  

  People walk past the Credit Suisse Group AG headquarters in Zurich, Switzerland, on Wednesday.

  Photo: Bloomberg

  “A capital increase appears increasingly likely” for Credit Suisse, Vontobel AG analyst Andreas Venditti said in a note to clients, estimating it needs 4 billion Swiss francs (US$4.02 billion).

  However, investors fear that such a move would dilute the value of bank shares.

  Its stock price has shed 70 percent since the collapse of British financial firm Greensill Capital Ltd in March last year. Credit Suisse was heavily exposed to the group.

  Carlo Lombardini, a lawyer and professor of banking law at the University of Lausanne, said a capital injection would leave a “bitter taste” for shareholders.

  “But they probably don’t have a choice,” Lombardini said.

  The bank must raise funds from shareholders to finance layoffs and the cost of restructuring, he said, adding that another option would be for the bank to sell assets.

  “It’s a tough choice,” Axiom Alternative Investments SARL investment director David Benamou said, adding that it would hurt the bank’s future revenues.

  “Market conditions are tight, and a seller who is forced to sell usually does not get a favorable price,” Benamou said.

  Analysts at Jefferies Group LLC said that “asset sales alone are unlikely to be the solution to the potential capital shortfall problem.”

  However, it “could be a first step and buy time until shares recover and the outlook gets better, at which time a capital raise, if needed, would be a less dilutive and more acceptable option,” they added.

  Credit Suisse shares have rebounded after sinking to a record low of SF 3.518 on Monday last week, showing that markets are giving it “a chance to put together a solid plan,” Swissquote Group Holding SA analyst Ipek Ozkardeskaya said.

  With its market value melting by SF 10 billion earlier last week, Credit Suisse became “a very attractive target for banks that would like to buy a nice wealth management branch,” Benamou said.

  However, the bank has the means to remain independent, and any bid could face political resistance, he said.

  In addition to a US$10 billion exposure to Greensill, the implosion of Archegos Capital Management LLC cost Credit Suisse US$5 billion, and if faced a US$475 million fine from US and British authorities last year over loans to state-owned companies in Mozambique.

  Despite rumors on social media that the bank might be on the brink of collapse, analysts have played down concerns that the Swiss bank could follow in the footsteps of Lehman Brothers Holdings Inc in 2008, saying that the government would not let it collapse.

  However, Benamou said a state intervention for Credit Suisse was unlikely, as banks have been required to put aside enough cash to withstand a new crisis following the 2008 financial shock.
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