The lender is slashing its risk exposures, pivoting to wealth management and trying to restore its fortunes after a run of losses. It posted a third-quarter loss as well as figures showing clients withdrew assets.

Credit Suisse is to raise SFr4 billion ($4.04 billion) in a restructuring overhaul, wind down investment banking exposures and make other changes to restore profitability.

As part of the capital-raising, Saudi National Bank is to buy SFr1.5 billion of the capital being raised, Credit Suisse said in a statement.  

The announcement came as Switzerland’s second-largest bank reported a third-quarter loss. Its shares fell about 12 per cent from the open on the SIX exchange.

The banking group has been hit by a mass of problems, such as exposures to a failed New York-based hedge fund/family office called Archegos, the Greensill Capital supply-chain business in the UK, and concerns about legacy issues. 

It logged a loss, on an attributable basis, of SFr4.034 billion in the three months to end-September, from a profit of SFr434 million a year earlier. Net revenues rose 4 per cent year-on-year to SFr3.8 billion. Clients removed SFr12.9 billion in net outflows in the quarter, contrasting with SFr5.6 billion of inflows a year before. Total assets under management fell to SFr1.4 trillion, down from SFr1.623 trillion. 

The loss, and outflows of client money, come as the bank is trying to recover its reputation for stability. Other banks, of course, have seen assets hit by heavy falls to global markets in 2022, although rising interest rates have helped with margin compression. 

Changes
The lender expects to “radically restructure” the investment bank and slash its risk-weighted assets. RWAs and leverage exposure is expected to fall by about 40 per cent over the next three years.

The Zurich-listed group said it plans to shrink costs about by about 15 per cent, or SFr2.5 billion, to SFr14.5 billion in 2025. Media reports said about 9,000 staff roles will go.

Ulrich Körner, Credit Suisse’s CEO, said: We are radically restructuring the Investment Bank to help create a new bank that is simpler, more stable and with a more focused business model built around client needs.”

A “significant portion of the Securitized Products Group (SPG) will be transferred to an investor group led by Apollo Global Management.

To attain a group Common Equity Tier 1 ratio of more than 13.5 per cent by end-2025, Credit Suisse said it intends to raise about SFr4 billion by issuing new shares to qualified investors, including Saudi National Bank, which has committed to invest up to SFr1.5 billion to achieve a shareholding of up to 9.9 per cent, and through a rights offering for existing shareholders, subject to approval at the extraordinary general meeting on November 23, 2022. These measures are expected to translate into a diversification of the bank’s shareholder base and increase the group CET1 ratio from 12.6 per cent at Q3 2022 to a pro forma about 14 per cent ratio. 

Credit Suisse said it expects to sustain restructuring charges, software and real estate impairments in connection with the transformation of SFr2.9 billion over a period from the fourth quarter of 2022 to 2024. 

Pivot to wealth
As part of the changes, Credit Suisse said it will create a  Non-Core Unit (NCU) to accelerate the “run-down of non-strategic, low-return businesses and markets, to release capital”.

It plans to allocate almost 80 per cent of capital to wealth management, the Swiss bank, asset management and markets by 2025.

“Over 166 years, Credit Suisse has built a powerful and respected franchise but we recognize that in recent years we have become unfocused,” Axel P Lehmann, the bank’s chairman, said. “For a number of months, the board of directors along with the executive board has been assessing our future direction and, in doing so, we believe we have left no stone unturned.”

“Today we are announcing the result of that process – a radical strategy and a clear execution plan to create a stronger, more resilient and more efficient bank with a firm foundation, focused on our clients and their needs. At the same time, we 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 restructuring of the investment bank will involve actions across areas, including: 
-- The markets business will include the strongest and most relevant aspects of the new Credit Suisse’s trading capabilities. While remaining fully committed to serving institutional clients, Credit Suisse said its capabilities in cross-asset investor products as well as equities, FX and rates access will be closely aligned with the wealth management and Swiss bank franchises; 

-- The investment bank’s capital markets and advisory activities will – following a transition period – lead to the creation of CS First Boston. This operation is “expected to be more global and broader than boutiques, but more focused than bulge bracket players”, it said; 

-- The future CS First Boston envisions attracting third-party capital, as well as a preferred long-term partnership with the new Credit Suisse; 

-- The bank is also creating a capital Release Unit (CRU) will be created and comprise a NCU and the group’s securitized products business. The NCU’s purpose is to release capital through the wind-down of non-strategic, low-return and higher-risk businesses. 

-- The NCU is expected to include the remainder of prime services, non-wealth management related lending in Emerging markets, the bank’s presence in select countries and select European lending and capital markets activities. The NCU is expected, over time, to release about 60 per cent of risk-weighted assets and about 55 per cent of leverage exposure by the end of 2025.