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Credit Suisse CEO says outflows have reduced ‘very significantly’ as overhaul progresses
Switzerland’s second largest bank Credit Suisse is seen here next to a Swiss flag in downtown Geneva.
Fabrice Coffrini | AFP | Getty Images
Credit Suisse is seeing a sharp reduction in client outflows, as the embattled Swiss lender progresses with its major strategic overhaul, new CEO Ulrich Koerner told CNBC on Wednesday.
The bank in November projected a $1.6 billion fourth-quarter loss after announcing a raft of measures to address persistent underperformance in its investment bank and a series of risk and compliance failures. It also revealed at the time that it had continued to experience substantial net asset outflows.
“The outflows, as we said, have reduced very significantly, and we are seeing now money coming back in different parts of the firm,” Koerner said on the sidelines of the World Economic Forum in Davos, Switzerland.
As part of the overhaul, Credit Suisse shareholders in November greenlit a $4.2 billion capital raise, including a new private share offering that will see the Saudi National Bank become the largest interest holder, with a 9.9% stake.
Koerner said the transformation towards a “new Credit Suisse” was going well.
“We laid out a very clear plan, and we talked to all different stakeholder groups in the last three months, as you would expect,” he said.
“I think the plan, the strategy resonates very much. We are in full execution swing, so I think we are making really good progress.”
Credit Suisse has also reached out to tens of thousands of clients in Switzerland and around the world for feedback, Koerner said.
“That has generated very positive momentum, and I think this is momentum that travels with us through 2023,” he added.
‘Zero concerns’ over Klein business acquisition
Koerner confirmed that the reported departure of 10% of Credit Suisse’s investment bankers in Europe was part of its previously announced plans to cut 2,700 jobs by 2023 and reduce headcount by a total 9,000 by 2025.
As part of the overhaul, Credit Suisse will spin off and rebrand its U.S. investment banking division as CS First Boston. The new unit will be headed by former Credit Suisse board member Michael Klein. Credit Suisse is reportedly on the verge of buying Klein’s boutique investment advisory firm.
Koerner insisted that he had “zero concerns” about conflicts of interest, stressing that the bank could deal with the situation “in the utmost professional way.”
“I am really looking forward for Michael to join, because Michael is an excellent banker, he is an excellent dealmaker, and he is very entrepreneurial, and that is why I want to go together with him on a journey.”
U.S. investor Harris Associates has more than halved its stake in Credit Suisse since June 2022. Koerner said he could not judge the firm for its timing, but “we will certainly have discussions.”
Credit Suisse Warns of $1.6 Billion Loss After Clients Pull Money
Credit Suisse
CS -6.85%
Group AG warned it would lose around $1.6 billion in the fourth quarter after customers pulled their investments and deposits over concerns about the bank’s financial health.
The warning of a big pretax loss pushed Credit Suisse’s shares to a new closing low, below a previous nadir hit in late September as concerns swirled about the bank’s financial health.
Switzerland’s No. 2 bank by assets said outflows were around 6% of its total $1.47 trillion assets, or around $88.3 billion, between Sept. 30 and Nov. 11. Customers in its wealth-management arm—its main business serving the world’s rich—removed $66.7 billion from the bank. Credit Suisse in late October said that a social-media frenzy around its finances was causing large outflows. The bank typically attracts at least $30 billion in net new assets in a year and hasn’t posted an annual net outflow since 2008, according to its filings.
Analysts at JPMorgan said the outflows and the anticipated loss were much worse than they expected. The bank “is not out of the woods yet in terms of stabilizing the franchise,” they said.
The fast pace of withdrawals meant the bank’s liquidity fell below some local-level requirements, the bank said. It said it maintained its required group-level liquidity and funding ratios at all times. Banks must keep enough liquid assets on hand to meet expected cash outflows in a 30-day period, under post-financial-crisis-era rules.
Credit Suisse’s stock fell 6.1% Wednesday to end at 3.62 Swiss francs, a record closing low. The shares are down 59% this year, according to FactSet.
The cost to insure the bank’s debt against default rose Wednesday.
The warning comes at a precarious time for the bank, which weeks ago launched a sweeping overhaul of its operations. Credit Suisse received shareholder approval Wednesday on a plan to raise more than $4 billion in new stock. It is in the process of selling a large group within its investment bank to free up capital, as part of its recovery effort.
The new stock is being sold to new and existing investors, with terms due to be finalized Thursday. Saudi National Bank said it would take a stake of up to 9.9% as a new shareholder. Some analysts are concerned the new capital raising may not be enough if Credit Suisse’s revamp doesn’t go to plan. The bank’s capital needs depend on selling and exiting some businesses, and on how its continuing businesses perform.
Chairman
Axel Lehmann
said shareholders showed their confidence in the bank by approving the stock increase.
The reduction of customer assets means Credit Suisse has less money to manage and earns less in fees. A broader slowdown in activity in its wealth-management division and investment bank contributed to the warning of a pretax loss of around $1.6 billion for the quarter, it said.
In all, more than $100 billion has left the bank since June, according to Credit Suisse’s filings. It said client balances have stabilized in its Swiss bank and that the outflows have slowed in wealth management, but haven’t reversed.
Wealth management, the business of managing rich people’s money, is Credit Suisse’s largest and most important business. The bank’s overhaul is meant to reduce its reliance on risky Wall Street trades and double down on the steady fee-collecting business of working with the world’s ultra wealthy.
Large outflows indicate that some of those well-heeled clients have grown wary of Credit Suisse’s troubles despite its more than 160-year history. The bank was hit hard when a client, family office Archegos Capital Management, defaulted in March 2021, triggering a loss of more than $5 billion.
Uncertain markets have meant clients aren’t transacting as much across wealth managers. However, crosstown rival UBS Group AG reported around $35 billion in net new fee generating assets from wealth- and asset-management clients in the third quarter.
Concerns about the bank reached a fever pitch in October when commentators on social-media platforms Twitter and Reddit called into question the bank’s health.
Credit Suisse warned last month it would make a net loss in the fourth quarter, in part because of costs from the overhaul. It posted consecutive quarterly losses this year after starting to restructure its operations late last year. In last year’s fourth quarter, it lost around $2.2 billion.
The bank said it is still targeting a capital ratio of at least 13% between 2023 and 2025 as it restructures.
Write to Margot Patrick at margot.patrick@wsj.com
Corrections & Amplifications
Credit Suisse reported about a $2.2 billion net loss in the fourth quarter of 2021. An earlier version of this article incorrectly said it lost around $1.7 billion in the quarter. (Corrected on Nov. 23)
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Credit Suisse cutting 2,700 jobs in fourth quarter, expects more by 2025
Former FDIC Chair Sheila Bair discusses Credit Suisse’s issues as the U.S. faces economic challenges and how the Fed will keep financial systems ‘stable.’
Credit Suisse Group AG is reducing its workforce by 5% in the fourth quarter and plans to trim its headcount even more by 2025, the company said Thursday.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| CS | CREDIT SUISSE GROUP AG | 3.92 | +0.08 | +2.08% |
The 5% fourth-quarter reduction amounts to 2,700 full-time-equivalent employees, according to a press release from Credit Suisse. The bank said it expects to further cut its total workforce to roughly 43,000 by the end of 2025.
Credit Suisse said it had roughly 52,000 full-time-equivalent employees at the end of the third quarter, for which the bank reported its earnings Thursday.
CREDIT SUISSE SEEKS TO CALM MARKET JITTERS
The plans to reduce its headcount came as Credit Suisse released details about its “transformation plan.”
The plans to reduce its headcount came as Credit Suisse released details about its “transformation plan.” (Spencer Platt/Getty Images / Getty Images)
Credit Suisse will spin off its capital markets and advisory activities into CS First Boston and “allocate almost 80% of capital to Wealth Management, Swiss Bank, Asset Management and Markets,” among other measures, it said. (REUTERS/Arnd WIegmann/File Photo / Reuters Photos)
The bank will spin off its capital markets and advisory activities into CS First Boston and “allocate almost 80% of capital to Wealth Management, Swiss Bank, Asset Management and Markets,” among other measures, it said. The Saudi National Bank has “committed to invest” up to 1.5 billion Swiss francs into Credit Suisse, according to the Swiss bank.
HOW A SOCIAL MEDIA FRENZY AROUND CREDIT SUISSE RATTLED ITS STOCK
The plan aims to “create a stronger, more resilient and more efficient bank with a firm foundation, focused on our clients and their needs,” chairman Axel Lehmann said in a statement, adding that Credit Suisse will “remain absolutely focused on driving our cultural transformation, while working on further improving our risk management and control processes across the entire bank.”
The plan aims to “create a stronger, more resilient and more efficient bank with a firm foundation, focused on our clients and their needs,” according to Credit Suisse chairman Axel Lehmann. (REUTERS/Brendan McDermid / Reuters Photos)
For the third quarter, the company reported 3.8 billion Swiss francs in net revenues, climbing 4% quarter-over-quarter but falling 30% year-over-year. It had a net loss of 4.03 billion Swiss francs.
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Credit Suisse seeks billions from investors in make-or-break overhaul
ZURICH, Oct 27 (Reuters) – Credit Suisse plans to raise 4 billion Swiss francs ($4 billion) from investors, cut thousands of jobs and shift its focus from investment banking towards its rich clients, as the bank attempts to put years of scandals behind it.
The Swiss lender outlined on Thursday what its chairman Axel Lehmann dubbed a “blueprint for success”, after it racked up an unexpected 4 billion Swiss franc loss in the third quarter of the year.
The announcement followed torrid weeks for the bank and fell flat with investors. Its stock, which has plumbed record lows in recent weeks, dropped about 14 percent in early trading, valuing the embattled bank around 11 billion francs.
Credit Suisse said clients pulled funds in recent weeks at a pace that saw the lender breach some regulatory requirements for liquidity, underscoring the impact on its business of wild market swings and a social media storm.
The group added that it was stable throughout.
Analysts gave the announcement a lukewarm welcome. Vontobel’s Andreas Venditti said the bank was embarking on a “lengthy process to restore credibility”.
“Resolute execution and no further missteps will be key and it will take time until results will begin to show,” he said.
The turnaround plan has many elements, from cutting jobs to refocusing on banking for the wealthy.
It will cut 2,700 jobs or 5% of its workforce by the end of this year, and ultimately reduce its workforce by roughly 9,000 to about 43,000 by the end of 2025.
The Swiss bank said it also aims to separate out its investment bank to create CS First Boston, focused on advisory work such as mergers and acquisitions and arranging deals on capital markets.
The bank envisions selling a stake but keeping roughly 50% in the new business, said one person familiar with the issue. It is also exploring the possibility of an initial public offering, another source familiar with the matter said.
Saudi National Bank, majority-owned by the government of Saudi Arabia, said it will invest up to 1.5 billion francs in Credit Suisse to take a stake of up to 9.9% and may invest in the investment bank.
The move bolsters Saudi influence in one of Switzerland’s best-known banks. Olayan Group, one of the biggest Saudi family-owned conglomerates, with a multibillion dollar investment portfolio, also owns a 5% stake in the bank.
The Qatar Investment Authority – which owns about 5% of the Swiss bank – declined to comment on whether it plans to buy any shares.
Credit Suisse said it will create a capital release unit to wind down non-strategic, higher-risk businesses, while announcing plans to sell a large part of its securitised products business to an investor group led by Apollo.
The bank will also wind down some trading businesses in emerging markets and equities.
Its heavy loss in the third quarter was due in large part to write-offs linked to its investment banking overhaul, including adjustments for lost tax credits.
JPMorgan analysts said that “question marks remain” over the restructuring of investment banking, adding that the share sale would also weigh on the stock.
The latest revamp, aiming to overcome the bank’s worst crisis in its history, is the third attempt in recent years by successive CEOs to turn the group around.
Once a symbol for Swiss reliability, the bank’s reputation has been tarnished by a series of scandals, including an unprecedented prosecution at home involving laundering money for a criminal gang.
The bank had been rushing to raise money and free up capital by selling assets, keen to limit how much cash it would have to raise from investors to fund its overhaul, handle its legacy litigation costs and retain a cushion for rough markets ahead.
Credit Suisse needs to revamp after a series of costly and morale-sapping blunders that triggered a wholesale change of management.
In refocusing away from risky investment banking to banking for the globe’s rich, Credit Suisse is following in the footsteps of its bigger Swiss rival, UBS.
The UBS turnaround succeeded in large part because of a flood of freshly printed money from the world’s central banks to reignite the economy during the financial crisis.
Credit Suisse, on the other hand, is attempting to refocus its business in a world facing war, an energy crisis, rocketing inflation and an economic slide.
Last year, the bank took a $5.5 billion loss from the unravelling of U.S. investment firm Archegos and had to freeze $10 billion worth of supply chain finance funds linked to insolvent British financier Greensill, highlighting risk-management failings.
Its deepening problems even put it on the radar of day traders earlier this month, when a frenzy of wild speculation about its health sent its stock price into a tailspin to a record low.
($1 = 0.9858 Swiss francs)
Additional reporting by Michael Shields in Zurich and Yousef Saba in Dubai; Writing by John O’Donnell; Editing by Edmund Klamann
Our Standards: The Thomson Reuters Trust Principles.
Credit Suisse pays down debt to calm investor fears
ZURICH, Oct 7 (Reuters) – Credit Suisse (CSGN.S) will buy back up to 3 billion Swiss francs ($3 billion) of debt, the embattled Swiss bank said on Friday, making a show of strength as it seeks to reassure investors after a tumultuous week.
The move trims the bank’s debts and is an attempt to bolster confidence after steep falls in its stock price and bonds. Unsubstantiated rumours that its future was in doubt have swirled on social media amid concern it may need to raise billions of francs in fresh capital.
One of the largest banks in Europe, Credit Suisse is embarking on a radical turnaround after losing more than $5 billion from the collapse of investment firm Archegos last year, when it also had to suspend client funds linked to failed financier Greensill.
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Bank executives spent last weekend reassuring large clients and investors about its financial strength, seeking to dispel speculation about its future.
CEO Ulrich Koerner also told staff in a memo that it has sufficient capital and liquidity. read more
But his words only fuelled rumours about the bank, as a social media storm gathered pace, triggering a sell-off of its stock.
The bank said the debt buyback would “allow us to take advantage of market conditions to repurchase debt at attractive prices”.
Investors took heart. Credit Suisse shares gained as much as 3% in early trading on Friday, while the price of its euro-denominated bonds rose.
“It’s an opportunistic move to take advantage of market conditions that might be reassuring to some investors,” said Vontobel analyst Andreas Venditti. “If bought below par, a gain results that will increase capital slightly.”
TROUBLED CHAPTER
Earlier this week, in an unusual step, the Swiss National Bank, which oversees the financial stability of systemically important banks in Switzerland, said it was monitoring the situation at Credit Suisse.
Banks are deemed systemically important if their failure would undermine the Swiss economy and financial system.
The move is reminiscent of a multi-billion-euro debt buyback by Deutsche Bank in 2016, when it faced a similar crisis and doubts over its future.
Dixit Joshi, a former Deutsche executive, has recently joined Credit Suisse as finance chief.
Zuercher Kantonalbank said the bonds are currently trading at a high discount, which allows Credit Suisse to cut debt at a low cost. Analyst Christian Schmidiger said the move was also a “signal that Credit Suisse has sufficient liquidity”.
Credit Suisse said it was making a 1 billion euro cash tender offer in relation to eight euro or pound sterling denominated senior debt securities and another offer to buy back 12 U.S. dollar denominated senior debt securities for up to $2 billion.
The developments unfolded after sources recently told Reuters that Credit Suisse was sounding out investors for fresh cash, approaching them for the fourth time in around seven years.
Under a restructuring launched by Chairman Axel Lehmann, the bank envisions shrinking its investment bank to focus even more on its flagship wealth management business. Chiefly, he hopes to close a troubled chapter for the bank and repair its reputation.
Over the past three quarters alone, losses have added up to nearly 4 billion Swiss francs. Given the uncertainties, the bank’s financing costs have surged.
The bank is due to present its new business strategy on Oct. 27, when it announces third-quarter results.
Rating agency Moody’s Investors Service expects losses for Credit Suisse to swell to $3 billion by year-end, Moody’s lead analyst on the bank told Reuters on Thursday. read more
The bank has also said it is looking to sell its upmarket Savoy Hotel, one of the best-known hotels in Zurich. read more
($1 = 0.9897 Swiss francs)
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Writing by John Revill and John O’Donnell; additional reporting by Amanda Cooper in London; editing by Mark Potter and Jason Neely
Our Standards: The Thomson Reuters Trust Principles.
Credit Suisse to buy back $3 billion in debt, sell hotel as credit fears persist
Signage hangs over the entrance of a Credit Suisse Group AG branch in Zurich, Switzerland, on Sunday, Sept. 25, 2022. Inflation in Switzerland has more than doubled since the start of the year and the State Secretariat for Economic Affairs expects it to come in at a three-decade-high of 3% for 2022. Photographer: Pascal Mora/Bloomberg via Getty Images
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Troubled bank Credit Suisse offered to buy back up to 3 billion Swiss francs ($3.03 billion) of debt securities Friday, as it navigates a plunging share price and a rise in bets against its debt.
The Swiss lender also confirmed that it is selling its famous Savoy Hotel in Zurich’s financial district, prompting some speculation that it is scrambling for liquidity.
In a statement Friday regarding the offer to repurchase debt securities, Credit Suisse said: “The transactions are consistent with our proactive approach to managing our overall liability composition and optimizing interest expense and allow us to take advantage of market conditions to repurchase debt at attractive prices.”
It comes after Credit Suisse’s shares briefly hit an all-time low earlier this week, and credit default swaps hit a record high, amid market’s skittishness over its future.
The embattled lender is embarking on a massive strategic review under a new CEO after a string of scandals and risk management failures, and will give a progress update alongside its quarterly earnings on Oct. 27.
The most costly of the scandals was the bank’s $5 billion exposure to hedge fund Archegos, which collapsed in March 2021. Credit Suisse has since overhauled its management team, suspended share buybacks and cut its dividend as it looks to shore up its future.
Shares closed at 4.22 Swiss francs on Thursday. They are down over 50% year to date.
On Friday, the bank announced a cash tender offer relating to eight euro or sterling-denominated senior debt securities, worth up to 1 billion euros ($980 million), along with 12 U.S. dollar-denominated securities worth up to $2 billion. The offers on the debt securities will expire by Nov. 3 and Nov. 10, respectively.