Credit Suisse launches $4bn Saudi-backed fundraising

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Credit Suisse is set to raise billions in capital, carve up its investment bank and cut thousands of jobs, in an effort to restructure its business and move on from a litany of scandals and a SFr4bn third quarter loss.

The Swiss bank is seeking to raise SFr4bn ($4.05bn) of capital, including SFr1.5bn from the Saudi National Bank, which will become the second-largest shareholder in the group, owning 9.9 per cent.

Credit Suisse has also agreed to sell part of its securitised products unit to US investment groups Pimco and Apollo and outlined plans to spin off its capital markets and advisory business over the next three years under a rejuvenated CS First Boston brand.

The bank said on Thursday it would cut SFr2.5bn of costs, representing 15 per cent of its cost base, by 2025. It added that the workforce would shrink from 52,000 to 43,000 over the next three years, including plans to cut 2,700 roles by the end of this year.

Credit Suisse shares fell 12 per cent on Thursday morning.

The moves are part of the lender’s second strategic revamp in less than a year as Credit Suisse attempts to right itself after a series of losses and crises that prompted wholesale changes of the bank’s leadership.

“This is a historic moment for Credit Suisse,” said chief executive Ulrich Körner. “We are radically restructuring the investment bank to help create a new bank that is simpler, more stable and with a more focused business model built around client needs.”

Körner was appointed chief executive in July with a mandate to strip back the scandal-prone investment bank, find savings and dedicate more resources to wealth management.

Credit Suisse also reported a SFr4bn loss for the third quarter – including writing off SFr3.7bn of deferred tax assets related to the restructure – on Thursday after warning three months earlier that a loss was likely.

Analysts had expected Credit Suisse’s investment bank to perform poorly because of its reliance on sectors that have struggled in the third quarter, including leveraged finance and dealmaking.

The bank has lost revenues after cutting back divisions such as its prime brokerage unit as it seeks to reduce risk following its involvement in scandals last year over the collapse of Greensill Capital and family office Archegos.

Under the strategic plan, Credit Suisse plans to reduce risk-weighted assets in its investment bank by 40 per cent over the next three years and focus the unit on serving institutional and wealth management clients with equities, foreign exchange and rates.

Credit Suisse will set up a capital release products unit, a “bad bank” holding pen for high-risk assets that it seeks to wind down. The unit will include the bank’s securitised products business, although Credit Suisse has struck an agreement with Pimco and Apollo to “transfer a significant portion” of the division’s assets to them.

Should the bank’s investors approve the SFr4bn capital raise at an extraordinary general meeting on November 23, the Saudi National Bank will become the second-largest shareholder in the group, just behind US investment group Harris Associates.

Earlier on Thursday, the Saudi National Bank published a statement on the Saudi stock exchange saying it was considering contributing to a future Credit Suisse capital raise to “support the establishment of an independent investment bank focused on advisory and capital markets activities.” 

The bank’s top five shareholders include the Qatar Investment Authority and the Olayan Group, a private investment business with Saudi roots.

Credit Suisse said the investment would allow the bank to raise its common equity tier 1 ratio — an indicator of its financial strength — to 14 per cent from 12.6 per cent.

It said director Michael Klein would leave the board to advise Korner on spinning out the CS First Boston business, which he would later lead as chief executive. The bank also confirmed Financial Times reporting in the summer that former investment bank chief executive Christian Meissner would leave the group.

Credit Suisse has already received a $500mn commitment to back the CS First Boston business, which could be listed at a future date, according to a person involved in the plans for the business.

The bank reported SFr12.9bn of outflows as clients in its wealth management business and Swiss domestic bank pulled money from their accounts and switched to rivals. Dixit Joshi, its new chief financial officer, said the withdrawals mostly happened in response to social media rumours that the bank was in distress.

Revenues fell 30 per cent compared with a year earlier, driven by a 58 per cent fall in investment banking income, an 18 per cent drop in wealth management revenues and a 9 per cent decline in the Swiss domestic bank.

The business set aside SFr178mn in provisions for major litigation and a SFr145mn impairment on IT-related assets in wealth management. Overall, costs were down 10 per cent compared with a year earlier, driven by a SFr398mn fall in pay and bonuses, reflecting the drop in revenues.

Credit Suisse last week announced the sale of its 8.6 per cent stake in Allfunds, the listed Spanish investment company, for €334mn.

The bank has also been clearing up a swath of legacy legal cases, including agreeing to a €238mn fine following a French investigation into tax evasion and money laundering, as well as a $495mn settlement with US prosecutors over financial crisis-era mortgage bond sales.

Credit Suisse shares are down more than 50 per cent this year, having hit a record low this month after becoming the target of social media speculation about its financial health.

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