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[ZURICH] Swiss bank Credit Suisse plans to tap investors for a "substantial" capital raising to fund a restructuring of the bank under new Chief Executive Tidjane Thiam, the Financial Times said on Thursday.
Since taking charge of Credit Suisse in July, Thiam has signalled a desire to focus on banking for the world's wealthy, particularly in Asia, amid talk of a need to raise cash to improve its capital position.
The FT, citing people briefed on the plan, did not specify how much Thiam will try to raise when he unveils the plan on Oct 21, but it pointed to a Goldman Sachs poll showing 91 per cent of investors expect Credit Suisse to raise more than 5 billion Swiss francs (S$7.2 billion) in new equity.
Credit Suisse said in a statement the bank was still evaluating strategic options for the bank as well as its capital usage and requirements, and that it would present the results of the review on Oct 21. "The overwhelming majority expects a size (of a cash call) above 5 billion francs, which is a lot if it doesn't come along with a convincing new strategic concept," said Kepler Cheuvreux analyst Dirk Becker, who has a 'reduce' rating on the stock.
Fresh capital would help the bank withstand expected losses from a restructuring, the FT said. It would also help Credit Suisse meet tougher capital targets which are expected to be outlined by Switzerland in the coming months.
Credit Suisse investors have previously told Reuters they would support a rights issue by Thiam, the well respected former boss of UK insurer Prudential.
Although such a move would be dilutive for shareholders, it should end concerns about its capital strength and provide Thiam with cash to expand.
Credit Suisse's common equity ratio was 10.3 per cent at the end of June, well below UBS's 14.4 per cent and the average of 13 per cent for Europe's biggest 24 banks.
The cash would not be used to fund a takeover of Swiss private bank Julius Baer, a combination that has been rumoured for several months. The FT said Thiam had made it clear inside the bank he did not see the logic behind the move.
Thiam will look to trim costs through investment in technology as well as cut down on division bosses and install regional heads across business lines.
Along with a stronger focus on wealth management instead of investment banking, Thiam also wants to establish a substantial asset management operation within the bank, the FT reported.
Thiam could also cut less profitable units like its US broker-dealer unit.
Credit Suisse shares fell as much as 4.9 per cent after the report and closed down 3.6 per cent, underperforming a 0.6 per cent decline by Europe's banking index.