The logo of Swiss bank Credit Suisse is seen at its headquarters in Zurich, Switzerland, March 24, 2021.
Arnd Wiegman | Reuters
Swiss credit Shareholders on Wednesday approved a 4 billion Swiss franc ($4.2 billion) capital increase aimed at funding the struggling lender’s massive strategic overhaul.
Credit Suisse’s capital raising plans are divided into two parts. The first, which was supported by 92% of shareholders, allocates shares to new investors including the Saudi National Bank via a private placement. The new share offering will see the SNB take a 9.9% stake in Credit Suisse, making it the bank’s largest shareholder.
SNB Chairman Ammar AlKhudairy told CNBC in late October that the stake in Credit Suisse had been acquired at the “bottom price” and urged the Swiss lender “not to bat an eyelid” over its sweeping restructuring plans.
The second capital increase issues newly registered shares with pre-emption rights for existing shareholders, and was adopted with 98% of the votes.
Credit Suisse Chairman Axel Lehmann said the vote marked an “important step” in building the “new Credit Suisse”.
“This vote confirms confidence in the strategy, as we presented it in October, and we are fully focused on delivering on our strategic priorities to lay the foundation for future profitable growth,” Lehmann said.
Credit Suisse forecast a fourth-quarter loss of 1.5 billion Swiss francs ($1.6 billion) on Wednesday as it begins its second strategic overhaul in less than a year, aimed at simplifying its business model. to focus on its wealth management division and the Swiss domestic market.
Restructuring plans include the sale of part of the bank’s Securitized Products Group (SPG) to US investment firms PIMCO and Apollo Global Management, as well as a downsizing of its struggling investment bank by through a spin-off of the capital markets and advisory unit, which will be renamed CS First Boston.
Multi-year transformation aims to shift billions of dollars of risk-weighted assets from persistently performing investment banking to wealth management and domestic divisions, and reduce the group’s cost base by 2.5 billion, or 15%, by 2025.
‘Too big to fail’, but more transparency needed
Vincent Kaufman, CEO of the Ethos Foundation, which represents hundreds of Swiss pension funds that are active shareholders of Credit Suisse, expressed disappointment ahead of Wednesday’s vote that the group was no longer considering a partial IPO of the Swiss National Bank, which he said would have “sent a stronger message to the market”.
Despite the share dilution, Kaufman said the Ethos Foundation would support the issuance of new shares to existing shareholders as part of the capital increase, but opposed the private placement for new investors, primarily the SNB.
“The capital increase without DPS in favor of new investors exceeds our dilution limits set out in our voting guidelines. I have spoken with several of our members, and they all agree that the dilution is too high,” he said.
“We are in favor of the part of the capital increase with right of first refusal, still believing that the possible partial IPO of the Swiss division would also have been an opportunity to raise capital without having to dilute the existing shareholders, we therefore do not favor this first tranche of capital increase with cancellation of the preferential subscription right.
At Credit Suisse’s annual general meeting in April, the Ethos Foundation tabled a shareholder resolution on climate strategy, and Kaufman expressed concern about the direction it would take under the bank’s new major shareholders.
“Credit Suisse remains one of the largest lenders to the fossil fuel industry, we want the bank to reduce its exposure, so I’m not sure this new shareholder will favor such a strategy. that our message for a more sustainable bank will be diluted among these new shareholders,” he said.
Wednesday’s meeting was not broadcast and Kaufman blasted the Credit Suisse board for proposing a capital increase and bringing in new outside investors “without considering existing shareholders” or inviting them to the meeting. .
He also raised questions about “conflicts of interest” between board members, with board member Blythe Masters also consulting for Apollo Global Management, which is buying part of Credit Suisse’s SPG, and board member Michael Klein is expected to lead the new trading and advisory unit, CS First Boston. Klein will step down from the board to launch the new venture.
“If you want to restore confidence, you have to do it clean and that’s why we are still not convinced. Again, a stronger message with an IPO of the Swiss domestic bank would have reassured at least the pension funds that we advise,” he said.
However, Kaufman stressed that he was not concerned about Credit Suisse’s long-term viability, calling it “too big to fail” and pointing to the bank’s strong capital reserves and shrinking outflows.