Bank Restructuring at Credit Suisse: Signs of Recovery?
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Drowning in scandal, Credit Suisse takes a drastic step to climb out of the pit by overhauling its corporate structure, slashing costs, and trimming jobs. A massive capital injection, a new major shareholder, and a revival of the investment banking division under a new brand are in the works. Will it be enough to save the sinking ship?
The details of the strategy have been unveiled. The Saudi National Bank, alongside professional investors, will gobble up 462 million new shares for CHF 3.82 each. Meanwhile, existing shareholders will have the opportunity to acquire 889.4 million shares at CHF 2.52 a pop as part of a subscription rights offer, getting two new shares for every seven held. The bank anticipates a gross proceeds of CHF 4 billion from the transaction. With this investment, the Saudi National Bank will become one of Credit Suisse's largest shareholders, holding roughly 10% of the company. Essentially, the Saudi kingdom is throwing its hard-earned cash at Credit Suisse. Two other Saudi investors already own a 5% stake in the bank. In the limelight, Credit Suisse's investment banking division is set to undergo a significant downsizing. The Swiss bank intends to focus on wealth management and the Swiss universal banking business in the future. The bank's recent fourth-quarter losses totaled CHF 4 billion due to write-offs, far surpassing analyst's expectations.
IPO on the back burner?
German banker Ulrich Körner took the reigns of Credit Suisse in August. Known for his tough-as-nails restructuring tactics, Körner declared a sweeping reconfiguration of the investment bank. He plans to spin off the advisory business for mergers and acquisitions under the revived brand "CS First Boston" into a separate company, open to external investors, including a potential initial public offering (IPO). However, the majority of the capital-intensive securitization business will be sold to Apollo Optik and the Allianz subsidiary Pimco. Despite this, Credit Suisse will continue to dabble in trading equities, currencies, and bonds. Analysts generally consider this approach to be on the right track.
But, all this might be a moot point now that Credit Suisse has been swept up by UBS Group AG on June 12, 2023[1]. This merger has drastically changed Credit Suisse's restructuring roadmap, shifting the focus towards integration with UBS. Before it could fully unfold, potential IPOs were shuffled to the back burner, as Credit Suisse is no longer a separate entity with the freedom to pursue such moves independently. Any future public offerings will be squarely in the hands of UBS's leadership.
- The Saudi National Bank, alongside professional investors, is expected to purchase 462 million new shares of the megabank, Swisse, for CHF 3.82 each.
- Existing shareholders will have the option to buy 889.4 million shares at CHF 2.52 apiece, as part of a subscription rights offer, resulting in two new shares for every seven held.
- The Swiss bank's investment banking division is set to undergo a significant reduction in size under Credit Suisse's new leadership, with a potential initial public offering (IPO) for the revived brand "CS First Boston" temporarily placed on hold due to the bank's merger with UBS Group AG.
