Credit Suisse to Raise $6.3 Billion Of Capital in Strategy Shift 

• Bank plans to hold IPO of Swiss banking unit by 2017
• Third-quarter profit misses estimates on investment bank loss

Credit Suisse Group AG will raise about 6.05 billion Swiss francs ($6.3 billion) of capital as part of a broad reorganization that will increase the bank’s focus on Switzerland and wealth management in Asia as it scales back the securities unit.

The bank plans an initial public offering of its Swiss banking unit by the end of 2017 to take advantage of consolidation in the country, Zurich-based Credit Suisse said in a statement Wednesday. Credit Suisse also plans to save 3.5 billion francs in costs by the end of 2018 on a gross basis.

The bank said it will restructure to create three regionally-focused divisions and split the securities unit into a markets business and an investment banking operation. To reflect the new organization, Credit Suisse named Helman Sitohang and Iqbal Khan among six new board members as Gael de Boissard, Hans-Ulrich Meister and Robert Shafir step down.

Chief Executive Officer Tidjane Thiam, brought in to rebuild investor confidence, is seeking to boost returns that are under pressure from tougher capital requirements and record-low interest rates. Under Thiam’s predecessor, Brady Dougan, the bank reduced emphasis on investment banking and focused more on wealth management. For many investors, that wasn’t enough. The stock posted the worst performance among 10 global peers over the past five years.

“We are rebooting the company, we are solving our capital issues,” Thiam said in an interview with Bloomberg Television. “One of our objectives coming in was to take capital off the table to raise enough capital so that this would not be again a topic of conversation at quarterly results.”

The bank on Wednesday reported third-quarter profit that missed analysts’ estimates after posting a loss in the investment bank. Net income decreased to 779 million Swiss francs from 1.03 billion francs a year earlier. The average estimate of seven analysts in a Bloomberg survey was for 858 million francs.

Net revenue from fixed-income sales and trading plunged 52 percent to 674 million francs as “extreme dislocations” in credit markets resulted in lower client activity, the bank said.

Credit Suisse said it will reduce the capital it allocates to the securities unit by scaling back the macro and prime services businesses. It will also “right-size” in London, the bank said.

The bank said it will sell 1.35 billion francs of stock to select shareholders and offer 4.7 billion francs to existing investors in a rights offer.

Source: Bloomberg – Credit Suisse to Raise $6.3 Billion Of Capital in Strategy Shift

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