Besieged Swiss lender Credit Suisse has been racing to finalize asset sales to help pay for its much-anticipated strategic overhaul, set to be unveiled on Thursday.
The pressure is on new CEO Ulrich Koerner to deliver a solid restructure after Switzerland’s second biggest bank has been involved in numerous scandals, which has wiped out Credit Suisse’s
stock price by as much as 57% this year.
Credit Suisse is set to publish its third quarterly results on Thursday, alongside a major overhaul plan.
It reported a 1.59 billion Swiss franc ($1.59 billion) net loss in the second quarter of 2022, and analysts polled by FactSet expect an adjusted loss of 642 million francs for the third quarter.
Market speculation suggests that the lender has been firming up sales in a bid to limit the amount of cash it needs to raise from investors to plug its capital shortfall of 5 billion francs ($5 billion), analysts estimate, and for the restructuring and make up for its losses in the few years.
On Friday, Credit Suisse sold its 30% stake in Energy Infrastructure Partners to the firm’s managing partners, EIP confirmed, for an undisclosed sum. It also raised €334 million from selling its 8.6% stake in Allfunds group, an Amsterdam-listed fund distribution company.
On Monday, it stamped out another headache by settling a tax fraud and money laundering case with French prosecutors, which sought to investigate whether Credit Suisse helped clients to avoid tax on their wealth. It will pay a €123 million ($121 million) public-interest fine and €115 million in damages to the French state.
The bank could sell parts of its asset management division to raise capital for the restructuring, The Financial Times reports. Its securitized products unit has recently drawn in offers from a number of interested parties including Mizuho Financial Group.
The move caused JPMorgan analyst Kian Abouhossein to upgrade the bank’s rating from underweight to neutral last week upon the news that a sale could be finalised by the group’s results on Thursday.
It is also reportedly working with Royal Bank of Canada and Morgan Stanley to raise at least $2 billion, according to media reports.
Last month, reports came out that Credit Suisse was floating the idea of splitting its investment bank into three: an advisory part of the business, a “bad bank” to hold risky assets, and everything else, which could result in thousands of job losses.
String of scandals
The restructuring comes as the bank attempts to clean up its tarnished reputation from years of scandals and problems.
Its most notable problems including losing roughly $5 billion from the collapse of two major firms last March -– U.S. family office Archegos Capital Management and U.K finance firm Greensill.
In June, Credit Suisse was found guilty by Switzerland’s Federal Criminal Court for not preventing money laundering by a Bulgarian cocaine trafficking gang. The bank said it would appeal the conviction.
In 2020, then CEO Tidjane Thiam was forced to step down after an investigation found the bank had hired private detectives to spy on a former executive who had left to join rival firm UBS.
Last year, Credit Suisse trimmed down its investment bank operations by 25% and its prime brokerage business involved in the Archegos loss.