Credit Suisse outlines Saudi-backed plan to raise $4bn

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The Swiss lender intends to raise $4 billion in capital, cut 9,000 staff and modernize its investment bank.

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Swiss bank Credit Suisse has announced plans to raise billions in new capital investment, cut 9,000 jobs and modernize its investment banking division in the latest attempt to change the group’s fortunes.

Switzerland’s second-biggest lender posted a massive third-quarter loss on Thursday as it launched a strategic review aimed at ending a series of scandals and building a “simpler, more focused and more stable bank.”

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Credit Suisse said it intends to raise capital of four billion Swiss francs ($4 billion) by issuing new shares to qualified investors, including the National Bank of Saudi Arabia, which has committed to invest up to 1.5 billion Swiss francs ($1.5 billion). ) to receive a block of shares. up to 9.9%. This would make him the group’s second largest shareholder.

Separately, the Swiss lender will also seek to strengthen its balance sheet by issuing rights to existing shareholders.

The bank also said it would cut its workforce from 52,000 at the end of September to around 43,000 over the next three years, “reflecting attrition and targeted staff reductions.”

It also announced plans to spin off its capital markets and advisory activities into a separate business called CS First Boston as part of a rebranding, and agreed to sell most of its securitized products business to Apollo Global Management and PIMCO.

Huge loss

The announcement came after the bank posted a net loss for the third quarter of 4.034 billion Swiss francs ($4 billion). The large losses were due in large part to write-downs related to its investment banking overhaul, including adjustments for lost tax credits.

Shares opened down 7.26 percent on the Swiss Stock Exchange’s main SMI index to 4.417 Swiss francs ($4.47).

Chairman Axel Lehmann said in a statement that the 166-year-old bank has “defocused” in recent years.

He said the reassessment of his direction included “a radical strategy and a clear implementation plan to create a stronger, more sustainable and more efficient bank with a solid foundation, focused on our clients and their needs.”

Lehmann added that the bank will work to improve its risk management and control processes after a number of investments have failed.

“I am convinced that this is the blueprint for success, helping to restore confidence and pride in the new Credit Suisse,” he said.

The latest revamp, to address the bank’s worst crisis in its history, is the third attempt by successive executives to turn the group around in recent years.

Once a symbol of Swiss reliability, the bank’s reputation has been tarnished by a series of scandals, including an unprecedented prosecution in its home country for laundering money for a criminal group.

New chief executive Ulrich Körner, who is considered an expert on bank restructuring, called Thursday’s announcement a “historic moment for Credit Suisse.”

“We are radically restructuring an investment bank to help create a new bank that is simpler, more stable and with a more focused business model built around customer needs,” he said.

Andreas Venditti, an analyst at Swiss investment firm Vontobel, said Kerner’s new strategic plan was “just the first step in a long process to rebuild confidence” among Credit Suisse stakeholders.

“Decisive execution and no further missteps will be key and it will take time before results start to show,” he said, adding that losses in the third quarter were “clearly worse than expected.”

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