The action Credit Suisse was condemned to stock market chaos on Friday, continuing the crossroads begun the day before after fresh rumors circulated, this time of a multi-billion capital raise.
At 11:00 a.m., registered Credit Suisse fell almost 5.9% from its already historically low closing price the previous day at CHF 4.37, after crashing to CHF 4.26 in the first exchanges, in an SMI 0.98%.
The stock has lost almost half its value since the beginning of the year. By way of comparison, the sale of its main competitor UBS fell 1.4% on Friday to CHF 15.03 and lost less than 10% in value over the same period.
Significant dilution in sight
On Thursday afternoon, Reuters pointed out that the number two of the Swiss bank, which had led to a comprehensive reorganization due to the recurring difficulties, had been in talks with major investors for several weeks with regard to a capital increase of several billion, sources said who are familiar with the matter.
At the request of AWP, the management of the bank with the two sails then reminded that a management report on the strategic orientation would be presented with the figures for the third quarter, i.e. on October 27th. “It would be premature to share results before that date,” a spokeswoman said.
The group’s new CEO, Ulrich Körner, said in July that the two-veil bank was looking for a solution to its securitized lending activities (Securitized Products Group), the volume of which could reach $2.5 billion, according to estimates submitted Christian Schmidiger, analyst at Zurich Cantonal Bank (ZKB).
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A possible sale of SPG and the de-risking of the balance sheet would result in a shortfall of up to CHF 4 billion for the announced restructuring, growth projects and equity build-up, which with a market capitalization of 12 billion would mean significant dilution for existing ones Shareholders, reports the ZKB.
Since the management of the troubled bank promised an update of its strategy with the publication of its third part at the end of July after its change of boss, the rumors have become even stronger. Various speculations are circulating, in particular about the future of the investment bank and a significant reduction in staff.
The rumor machine is churning
As recently as Thursday morning, the Financial Times (FT) reported that Credit Suisse was considering splitting its merchant banking arm into three separate entities, a move to sell profitable businesses precisely to avoid a capital raise.
The split would be on a model comprising three entities: the group’s advisory operations, which could later be separated, a bad bank managing risky assets for sale, and the division’s remaining business, the British daily said, citing those familiar with it Sources with The Reason.
By the time of former CEO Tidjane Thiam, the second-largest Swiss bank had already set up a defeasance department, the Strategic Resolution Unit (SRU), which consolidated the company’s unprofitable activities under one roof, or to transfer it for other reasons.
The Sunday newspaper had already spoken of a major dismantling of the Credit Suisse investment bank at the beginning of September. According to a preliminary scenario, which is to be discussed in the Zurich company’s board of directors, around 5,000 jobs could be cut as part of this restructuring.
Last week, Bloomberg reported that the two-veiled bank was considering reintroducing its US investment banking business under the name First Boston, taking the name of the company it acquired in the mid-1990s. “Credit Suisse First Boston” was discontinued in 2006.
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