On Thursday, the bank said it placed notes that will become shares in six months to offset the damage to its capital position by the loss and new charges imposed by the Swiss financial regulator. The offer will be based on the bank’s share price in the coming days and could raise about $ 2 billion in new capital.
He said he only had a small remaining exposure in Archegos on Wednesday after selling 97% of its related positions, but lost $ 655 million more from the fund in the second quarter, totaling a $ 4.7 billion charge during the second quarter. first term.
Swiss financial regulator Finma said on Thursday it had opened enforcement proceedings against the bank over how it managed risks around Archegos.
Shares of Credit Suisse fell as much as 5% on news of the capital raising. Its shares have plummeted by about a third since the end of February, although banking shares have generally performed well thanks to the recovery of the economies of the Covid-19 blockades.
To cushion Archegos ’blow, Credit Suisse had a strong quarter as investment banking activity grew on Wall Street. The bank is a leading sponsor of special purpose acquisition companies or SPAC, a booming corner of the fundraising world.
Revenue of Switzerland’s second largest bank by assets after the UBS group AG
UBS -0.71%
increased 31%, to about $ 8.3 billion, due to customer activity in expanding markets. The loss for the quarter was 252 million Swiss francs, or about $ 275 million.
Credit Suisse’s investment bank revenue rose 80%, driven by the hiring of companies and the sale of shares and bonds. Credit Suisse said its wealth management businesses, which do not report as a single division, earned revenue of about $ 4.232 billion, up 3% from the previous year.
But the bank’s ability to generate large profits in the future investment bank is overshadowed by the massive loss of Archegos. To prevent future explosions, the bank said it would resize its main brokerage operations serving hedge funds and family offices.
However, he did not point to a full withdrawal and noted that it will focus on key customers. As a sign that it is not willing to significantly reduce the investment bank, it will target a measure of its assets in this division at late 2020 levels.
Credit Suisse has been hardest hit by lenders at Archegos, an American family-owned investment company that has made a huge bet on some shares with borrowed money. The Wall Street Journal reported Wednesday that the bank had accumulated $ 20 billion in Archegos-related investments, but struggled to control them.
Credit Suisse has been the hardest hit by lenders at Archegos, a US family-owned investment company that bet heavily on some shares with borrowed money. Other banks also lost money when Archegos was unable to answer margin calls, but were able to leave positions more quickly. The fund’s problems came just weeks after Credit Suisse warned that the losses could be material from the collapse of another bank customer, Greensill Capital, with which Credit Suisse managed a $ 10 billion investment fund. of dollars.
Finma also said it opened enforcement proceedings for the Greensill funds. Credit Suisse said it made a loan with Greensill, but noted it has no plans to compensate investors who placed their money in the funds.
“We have not compensated investors in these funds. These are external investors, “said David Mathers, chief financial officer of Credit Suisse, on Thursday.
Archegos and Greensill’s double blow represents the bank’s biggest test in years and comes at a time of leadership transition. Thomas Gottstein took office a year ago as chief executive after his predecessor, Tidjane Thiam, was forced out after the bank was caught spying on a recently abandoned executive.
The bank’s longtime chairman, Urs Rohner, will retire after an annual shareholders ’meeting next week. He will be replaced by an outsider, the executive chairman of Lloyds Banking Group PLC, António Horta-Osório.
On Thursday, Mr Gottstein said the loss of Archegos was unacceptable. The bank cut the dividend and ousted its heads of risk, investment banking and equity. Its board of directors and regulators are studying what went wrong.
Credit Suisse said it is tightening risk controls on the main brokerage unit that served Archegos, adding that it hopes to reduce the size of its business serving hedge funds.
Credit Suisse claimed that one of the main measures of resistance, the Tier 1 capital ratio of equity, fell to 12.2%, from 12.9% at the end of December. It is placing nearly 203 million new shares with investors using convertible notes, which will raise the ratio to 13%.
Write to Margot Patrick at [email protected]
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