Credit Suisse raises US$4.3b capital after wild ride

CREDIT Suisse Group completed a 4 billion-franc (S$5.8 billion), two-pronged capital increase, giving chief executive officer Ulrich Koerner the funds needed to embark on a comprehensive restructuring of the troubled lender.

Investors agreed to buy 98.2 per cent of the stock on sale in a rights offer to raise 2.24 billion francs, Credit Suisse said in a statement late on Thursday (Dec 8). The remainder of the stock will be sold in the market at or above the offer price of 2.52 francs a share.

The rights issue was the second leg of the bank’s capital raising. The Zurich-based firm already raised 1.76 billion francs through a private placement last month to investors including Saudi National Bank, which will become the largest shareholder with just under 10 per cent.

Credit Suisse is shoring up its finances as it seeks to put to rest concerns about its financial strength after billions in losses over the past two years, recent client defections and asset outflows. It needs the funds to help pay for the exit from large parts of its investment bank and 9,000 job cuts. The lender has warned it will have a fifth straight quarter of losses as it reels from years of scandals and missteps.

“The successful completion of the capital increase is a key milestone for the new Credit Suisse,” Koerner said in the statement. “It will allow us to further support our strategic priorities from a position of capital strength and create a simpler, more stable and more focused bank built around client needs.”

Credit Suisse shares rose 3.2 per cent in Zurich trading on Thursday, amid reports that almost all shares had been taken up. The new shares will begin trading on Dec 9 on the Swiss stock exchange.

A rights issue is an offering of shares to existing investors to allow them to buy shares in proportion to their holding at a discounted price. Taking up the rights compensates investors for the dilution that occurs in a capital raising.

Last week, the shares fell to a record low of about 2.67 Swiss francs, just above the price of 2.52 francs for subscription rights that Credit Suisse offered existing investors. The bank had set the price at a discount of about 32 per cent to its stock value after the strategy presentation in October.

The bank said the rights offer will strengthen its CET1 ratio, a key metric of financial strength, by about 140 basis points. It also said cost savings measures it’s already started represent about 80 per cent of the planned 1.2 billion francs reduction in its 2023 cost base.

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The rights issue was fully underwritten by about 20 banks led by Deutsche Bank, Morgan Stanley, RBC Capital Markets and Societe Generale. BLOOMBERG