“Management will try at all costs to avoid a dilutive share issuance but they are a forced seller right now.”īank executives have noted that the firm’s 13.5% CET1 capital ratio at June 30 was in the middle of the planned range of 13% to 14% for 2022. “Somehow they have to come up with a few billion to cover the cost of the restructuring,” said Andreas Venditti, a banks analyst at Vontobel. The market value was above 30 billion francs as recently as March 2021. The firm is finalizing plans that will likely see sweeping changes to its investment bank and may include cutting thousands of jobs over a number of years, Bloomberg has reported.Ĭredit Suisse Working on Asset Sales as Part of New Strategy (1)Īnalysts at KBW also estimates that the bank may need to raise 4 billion Swiss francs ($4 billion) of capital even after selling some assets to fund any restructuring, growth efforts and any unknowns.Ĭredit Suisse’s market capitalization has dropped to around 10.4 billion Swiss francs, meaning any share sale would be highly dilutive to longtime holders. Koerner, named CEO in late July, has had to deal with market speculation, banker exits and capital doubts as he seeks to set a path forward for the troubled lender, which has been hit by a string of financial and reputational hits. Still, prominent figures took to Twitter over the weekend to dismiss some of the rumors circulating on social media prompted by the widened CDS spread as “scaremongering.” Saba Capital Management’s Boaz Weinstein tweeted “take a deep breath” and compared the situation to when Morgan Stanley’s CDS was twice as wide in 20. Some clients have used the rise in the CDS this year to ask questions, negotiate prices or use competitors, the people said, asking to remain anonymous discussing confidential conversations.Ī Credit Suisse spokesman declined to comment. The swaps now price in a roughly 23% chance the bank defaults on its bonds within 5 years. While the swaps are still far from distressed - and also part of a broad market selloff - they signify deteriorating perceptions of creditworthiness for the scandal-hit bank in the current environment. “But headline news flow is likely to remain negative and we do see significant execution risk in any new strategic plan.” “Credit Suisse is a buy for the brave at these levels,” Citigroup analysts including Andrew Coombs wrote in a note to investors. At the same time, Credit Suisse again sent around talking points to executives dealing with clients who brought up the credit default swap, according to people with knowledge of the matter. While acknowledging that the bank was at a “critical moment,” Koerner pledged to send employees regular updates until the firm announces its new strategic plan on Oct. The shares staged a comeback as several analysts backed Koerner’s view of the bank’s financial strength. Instead, it focused attention on the dramatic recent moves in the firm’s stock price and credit spreads, and investors rushed for the exit when trading reopened after the weekend. Koerner, for the second time in as many weeks, had sought to calm employees and the markets with a memo late Friday stressing the bank’s liquidity and capital strength. That was accompanied by a spike in the cost to insure the bank’s debt against default, which jumped to its highest ever.
The stock, which had already more than halved this year before Monday’s sell-off, fell as much as 12% to a record low before clawing back most of those losses and closing Zurich trading about 1% lower.
Credit Suisse Group AG was plunged into fresh market turmoil after Chief Executive Officer Ulrich Koerner’s attempts to reassure employees and investors backfired, adding to uncertainty surrounding the bank.
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