[MARKETS] Credit Suisse Progress Buys Swiss Bank Room on Capital

10:19:00 am  

Credit Suisse CEO Sees Brexit and Capital Options

   The “massive progress” Credit Suisse Group AG has made in its restructuring efforts has given the firm enough breathing room to consider alternative capital-raising options beyond a longstanding plan to list part of its Swiss bank unit, its chief executive officer said.
Advances that Switzerland’s second-largest lender had made in the past 12 months include $1.9 billion of cost cuts, a higher capital ratio and a settlement with the U.S. Justice Department over its sales of toxic mortgage debt, CEO Tidjane Thiam said in an interview with Bloomberg Television on Tuesday. While there will be more job cuts this year and next, he signaled that the worst may be over for cost reductions.
   The comments offer an insight into the bank’s decision to widen its range of options to plug a capital hole of as much as 4 billion francs ($4 billion) as it moves into the second year of a turnaround plan that’s been hampered by market turmoil, surprise trading losses and legacy issues. Credit Suisse is considering selling stock valued at more than 3 billion Swiss francs as an alternative to an initial public offering of its Swiss unit, people with knowledge of the matter said last week.

“The IPO was a capital backstop and we were clear about that in February” when the bank announced its full-year results, Thiam told Bloomberg Television’s Yvonne Man. “Now we’ve made so much progress that we can consider other options,” he said.

 Thiam, 54, declined to elaborate on specific proposals his board is considering. Credit Suisse isn’t talking to investment banks, he said.
  Like other big European lenders, Credit Suisse is reining in spending under pressure from low interest rates and rules requiring banks to hold more reserves. When Thiam began overhauling the bank in late 2015, Credit Suisse had a capital gap of between 9 billion francs and 11 billion francs.

  The firm has since tapped shareholders for 6 billion francs and had said it would seek to address further capital needs through listing its Swiss universal bank.
Speculation that the firm would look at alternative capital-raising plans has been building in recent months as its shares rallied almost 50 percent since July. The climb makes a stock sale an attractive alternative, analysts at UBS Group AG said in February.David Herro, chief investment officer of one of Credit Suisse’s top three shareholders, said this month he doesn’t think the company requires either a stock sale or the Swiss IPO. In an interview with Swiss newspaper Finanz und Wirtschaft last week, Thiam said he hopes to make a decision on capital options as soon as possible. Credit Suisse’s annual meeting with shareholders is scheduled for April 28.
“We know the market wants an answer, we know the market needs an answer, we’re working diligently and we will give a very clear answer in due course,” Thiam said in the Bloomberg TV interview, on the sidelines of his firm’s annual Asian Investment Conference in Hong Kong. “It is a complex decision, which is why we’re taking our time to make it.”
Thiam signaled a slowing of cost cuts: After about 2 billion francs last year, the bank will probably shed another billion this year and “a bit less than” 1 billion next year, he said. Credit Suisse has a target of 4.3 billion francs in gross cost savings by the end of 2018 and said in February that it plans to cut between 5,500 and 6500 jobs this year,“2016 we hope was the toughest year in terms of cuts,” Thiam said. “There are more cuts this year, a few more next year, but we’re starting to come out of that period.”In Asian equities, the bank shed some jobs in the first quarter, with plans for more reductions in the second quarter, Thiam said at a press conference after the interview. “Hopefully after that, most of it will be done.”