Credit Suisse is in the early stages of examining possibilities to boost its capital after a spate of losses has depleted its financial reserves, according to a report published by Reuters quoting sources.
The scale of the increase is expected to surpass one billion Swiss francs ($1.04 billion), but this has not yet been finalised, according to one of the sources, who declined to be identified because the discussions are still confidential.
The cash injection would assist Switzerland's second-largest bank in recovering from billions of dollars in losses in 2021 as well as a string of costly legal issues.
The preferred option is to sell shares to some of its significant existing investors, but Credit Suisse has not ruled out tapping all stockholders, according to this individual.
According to the other source, a business sale, such as Credit Suisse's asset management section, is also a possibility. According to them, the bank had not yet decided on any future action. Any acquisition was expected to take place in the second part of this year.
“Credit Suisse is currently not considering raising additional equity capital," the bank said in a statement.
"The Group is robustly capitalised with a CET1 ratio of 13.8% and a CET1 leverage ratio of 4.3%. Asset Management is an essential part of our group strategy presented last November, with four core divisions.”
The CET1 ratio is an important indicator of a bank's financial strength. Credit Suisse shares dipped approximately 3 per cent in early trading.
"The news, if confirmed, points to potentially more pain than we currently expect," Jefferies analysts wrote in a research note.
Analysts speculated that the decision could represent lower-than-anticipated earnings or a contingency plan in case the revenue and cost environment does not recover as projected in 2023.
Credit Suisse is reeling from billions of dollars in losses from failed investments in 2021, as well as the impact of various litigation challenges, including a Bermuda court fight that might cost $600 million. more info
The bank has been attempting to overhaul its risk management culture while also attempting to move past a number of scandals that have resulted in a succession of management shake-ups, abrupt exits, and internal and external probes.
In the last year, the bank's stock has dropped by more than a quarter.
This month, Fitch and Standard & Poor's both lowered Credit Suisse's debt ratings. According to one of the sources, Credit Suisse received a 4 in the Swiss financial watchdog FINMA's annual assessment of large Swiss banks, the lowest possible grade.
According to this source, one of the watchdog's key concerns was group capitalization.
There was no comment from FINMA.
The discussions over a capital increase came only a year after the Swiss bank raised approximately 1.75 billion Swiss francs from investors through required convertible notes.
Credit Suisse downplayed the need for new capital in April, even as it announced a first-quarter deficit that exacerbated its financial woes.
Credit Suisse officials stated at the time that capital would be constrained for the next six months as the bank continued to make large investments in compliance and risk, but a source familiar with the subject said at the time that a capital increase was not being considered.
The bank's core capital ratio fell from 14.4 per cent at the end of 2021 to 13.8 per cent at the end of the first quarter of 2022.
A new capital increase, on the other hand, would strengthen Credit Suisse's balance sheet while also sending a good signal. According to one of the sources, if well-known investors provided the bank with new funds, this could be interpreted as a vote of confidence.
(Source:www.reuters.com)
The scale of the increase is expected to surpass one billion Swiss francs ($1.04 billion), but this has not yet been finalised, according to one of the sources, who declined to be identified because the discussions are still confidential.
The cash injection would assist Switzerland's second-largest bank in recovering from billions of dollars in losses in 2021 as well as a string of costly legal issues.
The preferred option is to sell shares to some of its significant existing investors, but Credit Suisse has not ruled out tapping all stockholders, according to this individual.
According to the other source, a business sale, such as Credit Suisse's asset management section, is also a possibility. According to them, the bank had not yet decided on any future action. Any acquisition was expected to take place in the second part of this year.
“Credit Suisse is currently not considering raising additional equity capital," the bank said in a statement.
"The Group is robustly capitalised with a CET1 ratio of 13.8% and a CET1 leverage ratio of 4.3%. Asset Management is an essential part of our group strategy presented last November, with four core divisions.”
The CET1 ratio is an important indicator of a bank's financial strength. Credit Suisse shares dipped approximately 3 per cent in early trading.
"The news, if confirmed, points to potentially more pain than we currently expect," Jefferies analysts wrote in a research note.
Analysts speculated that the decision could represent lower-than-anticipated earnings or a contingency plan in case the revenue and cost environment does not recover as projected in 2023.
Credit Suisse is reeling from billions of dollars in losses from failed investments in 2021, as well as the impact of various litigation challenges, including a Bermuda court fight that might cost $600 million. more info
The bank has been attempting to overhaul its risk management culture while also attempting to move past a number of scandals that have resulted in a succession of management shake-ups, abrupt exits, and internal and external probes.
In the last year, the bank's stock has dropped by more than a quarter.
This month, Fitch and Standard & Poor's both lowered Credit Suisse's debt ratings. According to one of the sources, Credit Suisse received a 4 in the Swiss financial watchdog FINMA's annual assessment of large Swiss banks, the lowest possible grade.
According to this source, one of the watchdog's key concerns was group capitalization.
There was no comment from FINMA.
The discussions over a capital increase came only a year after the Swiss bank raised approximately 1.75 billion Swiss francs from investors through required convertible notes.
Credit Suisse downplayed the need for new capital in April, even as it announced a first-quarter deficit that exacerbated its financial woes.
Credit Suisse officials stated at the time that capital would be constrained for the next six months as the bank continued to make large investments in compliance and risk, but a source familiar with the subject said at the time that a capital increase was not being considered.
The bank's core capital ratio fell from 14.4 per cent at the end of 2021 to 13.8 per cent at the end of the first quarter of 2022.
A new capital increase, on the other hand, would strengthen Credit Suisse's balance sheet while also sending a good signal. According to one of the sources, if well-known investors provided the bank with new funds, this could be interpreted as a vote of confidence.
(Source:www.reuters.com)
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