The major Swiss bank is in talks with major shareholders about the terms of a possible capital increase, a person familiar with the situation told Reuters news agency. According to a second insider, the bank began several weeks ago to get major investors in the mood for a capital increase. Part of the group restructuring initiated by the board of directors around President Axel Lehmann is also a downsizing of the investment bank. Various scenarios were discussed. Two insiders explained that the most far-reaching option would include a far-reaching exit from the US market. However, a decision has not yet been made.
A Credit Suisse spokeswoman said: “We have previously said that we will be communicating the progress of our comprehensive strategy review along with the third quarter results. It would be premature to comment on any outcomes before this point.” Credit Suisse intends to present its quarterly financial statements on October 27th.
The institute, plagued by a series of failures, put its strategy to the test again at the end of July and replaced the CEO. Over the past three quarters alone, the losses added up to almost four billion francs. In view of the uncertainties, the financing costs for the bank have increased significantly. The analysts at Deutsche Bank estimated the capital shortfall in a study published at the end of August at at least four billion francs, which corresponds to around a third of the stock market value of the entire group.
Some of that could come from the sale of the mortgage and other loan securitization business that the bank has put on the front-page. According to insiders, the interest of potential buyers is great. These included financial investors, other banks and also insurers. The business is considered profitable, but also capital intensive. One expert estimated the deal to be worth between $1 billion and $2.5 billion. There could also be sales of other smaller areas. According to a report in the Financial Times newspaper on Thursday, the bank is desperately trying to avoid another capital increase in view of the lowest share price in at least 30 years.
According to one of the insiders, this will be difficult. However, the major investors with whom the bank is in talks made tough demands for participation in a capital increase. The Reuters news agency reported at the end of May that Credit Suisse was considering options to strengthen its capital. The bank had denied it at the time. Opinions differed within the board of directors as to how radical the cut in investment banking should be. If the bank exits US investment banking to a large extent, it would move certain areas that are important for its core business with millionaires and billionaires to other parts of the bank.
Zurich (Reuters)
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