Credit Suisse prepares to sell Swiss companies to raise capital
Credit Suisse is preparing to sell parts of its Swiss national bank as it tries to fill a capital hole of about 4.5 billion Swiss francs, according to people briefed on the talks.
With less than two weeks until the lender presents its plans for a sweeping strategic overhaul, executives are also set to prepare a heavy round of job cuts, which could affect up to 6,000 of the 50,000 global employees. of the group.
Ulrich Körner was appointed chief executive of Credit Suisse over the summer with a mandate to dismantle the embattled Swiss lender’s accident-prone investment bank and find 1.5 billion Swiss francs in cost savings, to following a succession of scandals in recent years that have seen the group’s share prices soar to record highs.
Although most of the attention has so far focused on the disposals of the Swiss lender’s investment bank – with executives convinced to sell all or part of the profitable securitized products business – the board of The administration also focused on raising funds by selling off non-core parts of its domestic business known as Banque Universelle Suisse.
While the main domestic operation – which offers a range of corporate, private and retail banking services in Switzerland – will remain intact, the company is negotiating the sale of several subsidiaries and stakes in other businesses.
Parts that have been considered for sale include: a stake in the SIX Group, which operates the Zurich stock exchange; an 8.6% stake in Allfunds, a listed Spanish investment company; two specialized Swiss banks, Pfandbriefbank and Bank-Now; and Swisscard, a joint venture with American Express.
Credit Suisse has held a stake in Allfunds since 2019 and the company was listed last year with a market capitalization of 7.2 billion euros. Since then, its shares have halved, meaning Credit Suisse’s 8.6% stake is worth around 374 million Swiss francs.
The bank is also trying to sell an iconic property, the two-century-old Savoy, Zurich’s oldest grand hotel, which faces the bank’s headquarters on Paradeplatz.
The luxury hotel, which is being renovated and due to reopen in 2024, could be worth 500 million Swiss francs, according to people at the bank.
The board has ruled out divestitures in Credit Suisse’s asset management and private banking businesses, according to people familiar with the plans, although it will continue to exit unprofitable smaller markets. This year, Credit Suisse has already withdrawn its wealth management operations in Mexico and sub-Saharan Africa.
Analysts have debated the size of the capital hole that will result from the changes the bank is imposing, with Goldman Sachs this week putting the figure at 8 billion Swiss francs.
But the bank’s board is confident it will be between 4 and 4.5 billion Swiss francs, after taking into account restructuring costs and legal fees, according to people familiar with the plans.
The bank’s board and management team evaluated each part of the business on three main criteria: profitability, capital requirements and importance to the wealth management business.
The New York-based securitized products business was assessed as too capital-intensive and having little overlap with the wealth management business, which will become the bank’s core business after the strategic review. The profitability of the unit made it an easier business to sell.
Those involved in the unit talks said they were confident of agreeing a sale by October 27 and were considering offers from several suitors, which ranged from buying the entire division to parts of it.
They confirmed interest from US investors Apollo Global Management, Pimco, Sixth Street Partners and Centerbridge Partners, as well as Japanese bank Mizuho Financial Group, which had previously been reported by Bloomberg and the Wall Street Journal.
JPMorgan analyst Kian Abouhossein raised his recommendation on Credit Suisse from underweight to neutral last week, saying he expected the securitized products business to be sold.
The unit, he predicted, would produce 1.2 billion Swiss francs in revenue in 2024, meaning its pre-tax profit of 400 million Swiss francs would make up the lion’s share of the total profit of 700 million Swiss francs. Swiss francs from the investment bank.
Credit Suisse declined to comment, saying it would provide a full update on the strategic plan on Oct. 27.
Additional reporting by Laura Noonan