Credit Suisse announces ‘radical’ restructuring with Saudi backing

London
CNN Business
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Credit Suisse will raise $4 billion to pull back from Wall Street and double down on managing the finances of the world’s wealthy, the scandal-plagued Swiss bank said Thursday.

The company unveiled a “radical” turnaround plan that it said would make it “a stronger, more resilient and more efficient bank.” The move means it will cut 9,000 full-time jobs by the end of 2025, with 2,700 cuts coming soon.

“This is a historic moment for Credit Suisse,” CEO Ulrich Körner said in a statement.

The lender said it already had a commitment of up to $1.5 billion from the Saudi National Bank, which would give it a stake of just under 10%.

The announcement failed to reassure investors — especially since it was accompanied by news that the bank lost roughly $4 billion in the third quarter. Shares in Credit Suisse ( CS ) plunged 15% in morning trade in Zurich.

The bank attributed its financial performance to widespread market volatility and global economic turmoil that has pushed customers to avoid risk, as well as the implementation of the restructuring plan.

Chairman Axel Lehmann said he was convinced Credit Suisse now has a “blueprint for success.” It will dramatically overhaul its investment bank, offload a large chunk of risky assets, and spin off CS First Boston, an independent entity that will house its capital markets and advisory business.

As part of efforts to reduce its investment bank, Credit Suisse will also transfer “a significant portion” of its securitized products group to a consortium of investors led by Apollo Global Management, the private equity firm. The unit trades in mortgage-backed securities and other loans.

In addition, Credit Suisse is targeting billions of dollars in cost reductions. The bank recently revealed that it wants to sell the famous Savoy Hotel in Zurich and sold its stake in fintech company Allfunds.

The lender wants to start a new chapter after a difficult stretch that has damaged the business and reputation.

One high-profile blunder involved the collapse of American hedge fund Archegos Capital last year, which cost Credit Suisse $5.5 billion. An independent external investigation later found “a failure to effectively manage risk”.

Earlier this month, social media speculation that the bank was on the brink of collapse sent shares on a wild ride.

Analysts said Credit Suisse had more than enough capital on hand to meet regulatory requirements and the liquidity needed to deal with a potential shock. But Credit Suisse said Thursday it had been hurt by the turmoil.

Assets under management fell to $1.4 trillion, falling by nearly $54 billion during the quarter as clients pulled their money.

“During the first two weeks of October 2022, following negative press and social media coverage based on incorrect rumours, Credit Suisse experienced a significant level of deposits and assets under management,” the bank said. “Although these outflows have stabilized since this period, they have not yet reversed.”