Credit Suisse shares hit record low on capital, strategy doubts
THE shares of the Credit Suisse Group slumped to a record low after the bank was forced to deny a Reuters report that it is considering exiting the US market, signalling that doubts still remain over the troubled lender’s upcoming strategy revamp.
“Credit Suisse is not exiting the US market. Any reporting that suggests otherwise is categorically false and completely unfounded,” a representative for the bank said in a statement late on Thursday (Sep 22).
Shares fell as much as 8 per cent on Friday, trading at 4.34 Swiss francs (S$6.29) as of 10.39 am in Zurich. The share price has declined by about two-thirds since the twin scandals surrounding Greensill Capital and Archegos Capital Management early last year.
The bank is now electing which businesses to cut, exit or keep as part of its second restructuring in less than a year. Its new chief executive officer Ulrich Koerner and chairman Axel Lehmann are seeking to shore up confidence in the lender and return it to profitability after a string of losses and missteps.
Credit Suisse is also sounding out investors for a possible capital raise, according to the report from the newswire on Thursday. The bank started in recent weeks to speak to investors about the move, Reuters said, citing 2 unnamed sources.
A bank spokesman reiterated the firm’s statement that it will update investors on the strategy review when it reports third-quarter earnings next month. “It would be premature to comment on any potential outcomes before then.”
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Analysts at Deutsche Bank said last month that Credit Suisse faces a capital gap of at least 4 billion Swiss francs to improve its financial strength, fund its restructuring and support growth. The Swiss bank’s leaders have said they are comfortable with the firm’s capital position.
Credit Suisse’s top executives and board members are weighing several options as they look to stem the historic stock rout. The firm has been talking to potential buyers for its securitised products group, a trading business with US$75 billion in assets by one measure, and has floated the idea of giving dealmakers an equity stake in their unit, auguring a possible spinout, Bloomberg has reported.
Analysts at Citigroup Inc indicated scepticism that a broad exit from the US market would be desirable. On one hand, the lender’s intention to attract outside capital to its securitised products business, along with the potential review of leveraged finance and credit businesses, “would fit with a larger exit from the US”, analysts including Andrew Coombs wrote in a note.
But “while the long-term capital release potential is sizable, we fear that capital could get ‘trapped’ in the US, while the near-term charges could be substantial,” they wrote. “This may prove a step too far.” BLOOMBERG
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