Banks: Credit Suisse: restructuring and entry of Saudi National Bank

The ailing major Swiss bank Credit Suisse wants to get out of the crisis with a capital increase, large-scale layoffs and a radical restructuring of investment banking.

Banks: Credit Suisse: restructuring and entry of Saudi National Bank

The ailing major Swiss bank Credit Suisse wants to get out of the crisis with a capital increase, large-scale layoffs and a radical restructuring of investment banking. Credit Suisse (CS) announced on Thursday that the Saudi National Bank will contribute CHF 1.5 billion (EUR 1.51 billion) to the capital increase and then own 9.9 percent of the share capital. The bank announced the issue of new shares with a total volume of around four billion Swiss francs. That's almost a third of the current market capitalization.

The second largest Swiss bank after UBS presented another large quarterly loss, the fourth in a row. In the third quarter, the loss was a good four billion francs and significantly higher than analysts had expected. The loss reportedly includes a CHF 3.7 billion write-down of deferred tax assets related to the bank's strategic review. Before taxes, the loss was CHF 342 million - after a profit of around one billion in the same period last year.

"The third quarter and the year to date in 2022 have been significantly impacted by the persistently difficult market and macroeconomic conditions," quoted the bank's CEO Ulrich Körner. He is known as a tough reorganizer and took over the top job in the summer. In the future, Credit Suisse will focus on wealth management and Swiss business. He announced a deep restructuring of the investment bank, in addition to strengthening the capital base and cutting costs.

Separation after losses

After recent heavy losses in investment banking, Credit Suisse wants to part with a significant portion of the capital-intensive securitization business (Securitized Products), in which loans are converted into securities. He is to be sold to a consortium around the private equity company Apollo.

The securitization business and other areas that are being abandoned are initially to be managed in a settlement unit (Capital Release Unit/CRU). Louise Kitchen, who is moving from Deutsche Bank to CS, will be in charge. Investment bank boss Christian Meissner resigns with immediate effect.

In addition, the capital markets and consulting business are to be spun off into the new CS First Boston unit over the next three years. "The future CS First Boston aims to raise outside capital and a preferred long-term partnership with the new Credit Suisse," the bank said.

The bank also wants to cut 17 percent of its 52,000 jobs. By the end of 2025 there should only be 43,000 employees. By the end of 2025, the costs are expected to fall by around 15 percent to CHF 14.5 billion. The bank had already confirmed the planned sale of the traditional Hotel Savoy in Zurich. The building was valued at up to half a billion francs.

The bank has been battered since the debacles surrounding the billion-dollar Archegos hedge fund collapse and Greensill fund liquidation last year. A series of scandals and court cases has eroded trust in the bank.

The market value of the bank has fallen since 2017 from CHF 45 billion at the time to below CHF 10 billion at times in October. At the beginning of October, the share price was at an all-time low of less than four francs before recovering slightly.

Credit Suisse Strategiepapier Credit Suisse 3. Quartal

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