Credit Suisse scrambles to finalize overhaul as deadline approaches

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  • Swiss bank overhaul project expected within a week
  • It is still unclear which companies can be sold and for how much
  • Lawmaker Matter: Ending U.S. Investment Banking

ZURICH/FRANKFURT, Oct 20 (Reuters) – Credit Suisse is rushing to firm up sales of part of its business which could limit the cash it needs from investors, a person with knowledge said. directly from the file. bank unveils a redesign.

The struggling Swiss lender wants to draw a line under a series of scandals and legal actions in a shake-up that would likely see it cut a volatile investment bank in London and New York to focus on banking for the wealthy. Swiss.

The restructuring is being closely watched by Swiss regulator Finma, which is in regular contact with the bank, said a second person familiar with the matter, pointing to the sensitivity of the overhaul.

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But days before the October 27 announcement, it remains unclear which companies can be sold and at what price – key pieces of a puzzle that will determine how much the bank may have to ask shareholders.

Analysts have said the company may need 9 billion Swiss francs ($9 billion) as part of a reorganization, some of which may have to come from investors and some from asset sales.

Management intends to sell businesses, such as securitized products, to its investment bank, the first person said, adding, however, that negotiations will likely take until the last minute before the overhaul is announced. .

The bank recently launched a process that could see its US asset management subsidiary sold, another source recently told Reuters, with initial expressions of interest expected later this week. However, there was no guarantee of sale.

Credit Suisse is also considering divesting parts of its advisory and investment banking business, which could attract outside investors and be called First Boston, Bloomberg reported.

If such transactions do not materialize or fail to meet expectations, Credit Suisse will raise capital, the person said. The bank declined to comment before its official announcement.

SPIN

Credit Suisse, one of Europe’s biggest banks, is trying to recover from a series of scandals, including losing more than $5 billion from the collapse of investment firm Archegos last year. last, when it also had to suspend client funds linked to bankrupt financier Greensill.

Earlier this month, in an unusual move, the Swiss National Bank, which monitors the financial stability of systemically important banks in Switzerland, said it was monitoring the situation at Credit Suisse.

It came after unsubstantiated speculation about the bank’s future on social media sent its stock plummeting. The bank’s president said its capital was strong. The stock price has fallen by about half its value this year.

The bank had previously approached investors about a capital raise, sources familiar with the matter said, indicating that selling assets, such as its Savoy hotel in Zurich, may not be enough.

Credit Suisse has engaged Royal Bank of Canada to help it arrange a capital raise to support its finances and secure funding for the restructuring, another person familiar with the matter said.

Morgan Stanley is also working on the capital increase, the first source said.

In addition to catching the attention of Swiss regulators, the episode also caught the attention of lawmakers in the country.

“I hope they announce that the American side of the business will be reduced – the investment bank in the United States must be dissolved,” said Thomas Matter, a senior parliamentarian from the Swiss People’s Party, the most the country’s largest party in parliament and a member of its ruling coalition.

“I’m more worried about Credit Suisse being taken over at a bargain price by a US bank,” he said.

Ray Soudah, chairman of Swiss mergers and acquisitions specialist Millenium Associates, said the divestments risked making Credit Suisse “an even bigger target”.

“It will further reduce the value of the business because it will reduce its revenue,” he said.

Last week, Credit Suisse Chairman Axel Lehmann, who took office in January, pledged to reform the bank after a “horrific” 2021 in which it lost billions of dollars, the most big loss in its history. Ian Lapey, director of Gabelli Global Financial Services Fund, a shareholder in the bank, said it needed to present an ambitious plan to keep investors on its side, for example by reducing the size of its investment bank.

“If the company puts in place a plan that basically makes some minor changes and seeks to raise capital, it will be very difficult.”

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Additional reporting by Emma-Victoria Farr in Frankfurt, David French in New York and Ross Kerber in Boston; Written by John O’Donnell; edited by Diane Craft

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