Credit Suisse shares tumbled to a record low on Friday, taking their decline this year to more than 50 per cent, following a report that the embattled bank was sounding out investors for a new capital raise.
Investors were responding to an article published by Reuters on Thursday afternoon that said the bank had been contacting investors to gauge interest in a fresh capital raise and that it was considering pulling its investment bank out of the US.
Credit Suisse did not comment on the capital raise, but denied it was planning to exit the US market.
People close to the bank said asking shareholders for more capital would be a last resort given the depressed stock price. Last April the bank was forced to raise SFr1.7bn of capital from investors as it sought to rebuild its balance sheet following back-to-back crises involving Archegos Capital and Greensill Capital.
The stock fell more than 9 per cent in afternoon trading to SFr4.22 ($4.29). Since the collapse of Greensill in March 2021, which led to Credit Suisse closing a $10bn group of investment funds, the bank’s shares have plunged 67 per cent.
A common refrain in Switzerland in recent weeks is that it is cheaper to buy Credit Suisse stock than a coffee in Zurich.
The bank’s board and executive team is in the middle of planning a major revamp of the business, which would strip back its investment bank and lead to thousands of job cuts.
Chair Axel Lehmann installed Ulrich Körner as chief executive in the summer with a brief to execute a radical shake-up, less than a year after the bank’s previous strategic review.
Under the latest plans put forward to the board, the investment bank would be divided into three and a “bad bank” holding pen for risky assets would be resurrected, the Financial Times reported this week.
Credit Suisse board members have accepted they will need to sell some assets to avoid a capital raise, with profitable businesses such as the New York-based securitised products business earmarked for sale.
Citi analyst Andrew Coombs said this was a possibility in a best-case scenario. “The net charge for an securitised products group exit could potentially be absorbed without the need for a capital raise, which we expect management would be keen to avoid with the stock trading on only 0.3 times price to tangible book value,” he said.
Last month, analysts at Deutsche Bank said the costs of paring back the investment bank would leave a SFr4bn hole in the group’s capital position due to restructuring costs, growing other business lines and strengthening its capital ratios.
Source: Financial Times