Credit Suisse: Adrift in the Fog - finews.com

With its new strategy, Credit Suisse management wants to create clarity on how the crisis-ridden bank will navigate the next three years. But it is not even apparent how exactly it will get through this year. It sounds more like a hopeful prayer than a strategy: «The Group’s actual results will depend on several factors including the Investment Bank’s performance for the remainder of the quarter, the continued exit of non-core positions, any goodwill impairments, and the outcome of certain other actions, including potential real estate sales,» Credit Suisse said in its fourth-quarter outlook published today. So an equation with at least four variables will determine whether the expected loss will be 1.5 billion francs. Or less. Or more. Share Price Lower Again Above all, it is uncertain whether Credit Suisse can staunch the outflow of client assets by the end of the year. About 84 billion francs were withdrawn across the group between the end of September and November 11. The core business with wealth management lost every tenth customer franc, a total of more than 63 billion francs headed for the exits, almost ten times the 6.4 billion francs in net outflows the division reported in the previous third quarter. If anything, the hemorrhaging in the core business appears to be accelerating. The bank warned of «subdued» client activity in wealth management, and that difficult market conditions are likely to persist in the months ahead. After the brief moment of clarity following October's new corporate strategy, the share price of Switzerland's second-largest bank drifted into the fog, at times falling by more than 5 percent in morning trading. This means that the shares have lost more than a tenth of their value within a week alone. Hardly a ringing market endorsement. Hundreds of Millions for Restructuring That a large majority of shareholders approved Credit Suisse carrying out two capital increases cushioned some downward pressure. After all, the bank will have around 4 billion francs in fresh funds to strengthen its capital base and finance its costly restructuring, a project that will cost the bank 250 million francs by the end of the year alone. «Today’s vote by shareholders marks a further important step in our journey to build the new Credit Suisse,» said Chairman Axel Lehmann on the outcome of the vote. However, Lehmann and the management team around CEO Ulrich Koerner seem to be steering the firm into a fog bank. The veteran banker and cost cutter in October managed to present a radical cure for Credit Suisse, which offered at least some reprieve. To be sure, milestones have been reached, such as the sale of parts of the business with investment banking. And now, of course, the urgently needed financial injection. Question of Returns Since the strategy was announced in October, the bank's situation has taken another sharp turn for the worse. In a closed system, Koerner's plan might have been quite impressive. But now the turnaround has to happen in an environment that BAK Economics considers much more difficult for Swiss banking as a whole. It is also significant that managers of more solidly capitalized private banks have in the meantime been pumping the brakes on costs across the board, as finews. com recently observed. In addition, the new strategy had at least one ambiguity from the very beginning. With the targeted return on equity of 6 percent by the end of 2025, it is probably unlikely for the bank to earn its cost of capital. Since the earnings base in wealth management is now rapidly crumbling, a question mark must probably be placed behind that target itself.

Credit Suisse Sees $1.6 Billion Fourth Quarter Loss - Bloomberg

Cash Exodus Loss expected in wealth division and investment bank Continues to see outflows of customer assets in fourth quarter By Marion Halftermeyer Credit Suisse Group AG warned it will book a loss of up to 1.5 billion Swiss francs ($1.6 billion) for the fourth quarter, and reported further outflows of wealth management funds amid a slump in client confidence. The Zurich-based bank said in a statement Wednesday it expects losses in both the wealth management division and its investment banking unit due to subdued activity, market conditions, continued outflows of customer assets and the sale of

Credit Suisse Bleeding Managed Assets- finews.com

Since the end of the third quarter, Credit Suisse experienced a further drop in assets under management. It warns of a loss in its wealth management business. Ahead of its extraordinary general meeting later today, Credit Suisse provided its outlook for the fourth quarter in which it said the outflow of deposits and assets continued since the end of the third quarter. Credit Suisse started experiencing deposit and net asset outflows during the first two weeks of October 2022 at levels that «substantially exceeded» rates seen in the third quarter. At the Group level, net asset outflows were approximately 6% of assets under management compared as of November 11, compared to the end of the third quarter, Credit Suisse said in a statement. The Swiss unit fared better where client balances stabilized and were approximately 1% of assets under management at the end of the third quarter. Today's EGM seeks shareholder approval for a capital increase, while major investors are pouring capital into the bank, among them Saudi National Bank, which plans to provide 1.5 billion francs which could give it 9.9 percent of the bank. Credit Suisse seeks to attract about 4 billion francs in new capital with the move. Wealth Management In the wealth management unit, the outflows were «reduced substantially» from the levels of the first two weeks of October, although have not reversed altogether and were about 10 percent of assets under management at the end of the third quarter. Lower deposits and assets under management are expected to result in reduced net interest income. recurring commissions and fees, and is likely to lead to a loss for Wealth Management in the fourth quarter, Credit Suisse said. Looking Ahead As previously announced, the bank expects the investment bank and the Group to report a «substantial» pre-tax loss in the fourth quarter of up to 1.5 billion Swiss francs for the Group. The statement went on to say the group’s actual results depend on a number of factors including the investment bank’s performance for the remainder of the quarter, exiting non-core positions, goodwill impairments, and other outcomes such as other actions, including potential real estate sales. Confirms Capital Ratio Guidance The Group confirmed the capital ratio guidance from October 27, targeting a 2025 CET1 ratio of over 13.5%, while expecting to maintain a pre-Basel III reform CET1 ratio of at least 13% throughout the transformation period in 2023 through 2025. Liquidity Buffers It also deployed liquidity buffers at the Group and legal entity levels. Although the bank fell below certain legal entity-level regulatory requirements, the core requirements of the liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) at the Group level have been maintained throughout.

Credit Suisse's Future Hinges on Overcoming a Fraught Past- bloomberg

How a bastion of Swiss banking lost its way. For more than 160 years, Credit Suisse Group AG’s stone-clad headquarters on Zurich’s moneyed Paradeplatz has exuded power, stability and quiet wealth. Those days are over. While the building’s colonnaded facade is still a sight to behold, the operations inside are suffering deeply, and the bank’s ability to bounce back hangs in the balance. Rocked by a steady drumbeat of scandals and management upheaval in recent years, the company that helped position Switzerland as a linchpin of international finance is losing billions of dollars. Key employees are leaving, and some clients have pulled out money. With the stock at record lows—

Everyone's Down On Credit Suisse. Here's Why I Love It.

There are no two ways about it -- Credit Suisse Group AG (CS) is a disaster. From 2021's implosion of hedge fund Archegos Capital to recently announced fundraising at less-than-ideal terms (not to mention a few other gaffes in the meantime), it's no wonder Credit Suisse shares are now priced at a third of their pre-pandemic peak from early 2020. Indeed, the stock's lost more than 90% of its value since 2007's high, largely due to the same lack of discipline that's been so pronounced just within the past few months. But as the old adage goes, nothing lasts forever. Enough shareholders and creditors finally had enough to jolt the Zurich-based outfit into real change. The stock may be near a major bottom, if it hasn't hit one already. Meet the (almost) new and improved Credit Suisse On the off chance you're reading this and don't already know, financial firm Credit Suisse is on the ropes. Its oversized stake in now-failed hedge fund Archegos is arguably its biggest recent blunder, leading to $5.5 billion in booked losses in early 2021. The blunder, however, is merely a proxy for the bank's other poor decision-making of late. Bribes, the backing of loans riskier than Credit Suisse was led to believe, and a lack of client oversight that implicated the bank as a drug-money launderer are some of the other missteps it's made just within the past few years. Now, with little other choice, the company is finally making necessary changes. One of those changes is the impending sale of much of its securitized products business to private equity outfit Apollo Global Management. Credit Suisse says this move will allow it to better focus on its core banking businesses. The move is also just a sampling of what's to come. In October, the company unveiled plans to drastically reduce its exposure to such risk-weighted assets, and ramp up its exposure to markets-related operations. Credit Suisse says it intends to devote 80% of its capital to wealth management and investment services by 2025. In the meantime, it's creating a division tasked with accelerating the "run-down of non-strategic, low-return business and markets, to release capital." Current CEO Ulrich Körner is the right person to lead this overhaul effort. He's something of an outsider with no particular ties to the old company or its old ways. He was only hired as the CEO of Credit Suisse's asset management arm in April of last year, taking the helm as head of the whole company in June of this year. He's part of the proverbial clean slate and highly experienced in the wealth management arena that's Credit Suisse's new priority. A distant light at the end of the tunnel The work's not done yet. As was noted, even by 2025, Credit Suisse still won't be entirely focused on investing and wealth management. The wind-down phase of its other ventures will also prove as expensive as it is complex. For example, while not officially a junk bond, the $5 billion raised via the sale of new debt earlier this month is costing the bank as much as 9%, nearing coupon rates that are considered high-risk "junk." The bank's Greensill debacle isn't fully in the past either. Greensill Capital is a supply chain financier that filed for bankruptcy in 2021, largely due to unpaid loans linked to the fallout from the pandemic. Since Greensill was largely backed by Credit Suisse, its implosion took a toll on the bank's bottom line. These outstanding loans are finally being addressed. Major Greensill and Credit Suisse borrower Liberty Steel Group just recently inked a preliminary debt-restructuring deal with debtholder Credit Suisse, as coal mining company Bluestone Resources and other borrowers did earlier this year. Given the amount of time that's passed since these loans were made and the fact that negotiations were required to settle them, however, it's not a stretch to suggest significant accommodations were made. Several Greensill investors are still mulling a lawsuit levied against Credit Suisse for its failures in the matter as well. On balance, though, the worst of the worst is in the rearview mirror. While it's distant, there's a light at the end of the tunnel. If Credit Suisse shares behave as most stocks of mid-overhaul companies do, it should start to reflect a brighter future before that future actually materializes. Fortune favors the bold It's hardly a risk-free choice, to be clear. It's still only an appropriate stock pick for risk-tolerant investors willing and able to give the bank at least five years to hammer out its turnaround plans. Expect lots of volatility in the meantime. If you can stomach such risk, Credit Suisse is a compelling prospect -- if only because nobody seems to like it now. As Warren Buffett put it, be "fearful when others are greedy, and greedy when others are fearful." There's certainly no shortage of fear here.

Apollo Interested in Another Credit Suisse Subsidiary- finews.com With NO VALUATION

After Credit Suisse sold its US securitization business to Apollo, another deal is said to be in the offing. The US investment firm has now agreed to acquire Sector Financial, a Credit Suisse subsidiary specializing in financing and lending to mid-sized companies, as «Bloomberg» reports citing people familiar with the matter. Sector Financial, headquartered in Chevy Chase, Maryland, outside of Washington DC, focuses on borrowers in industries such as healthcare and technology, offering loans ranging from $10 million to over $100 million. Its business portfolio also includes commercial mortgages and leveraged loans. Apollo operates a mid-market lending platform under the name MidCap Financial. Credit Suisse announced on Tuesday that it would sell a large part of its securitization business to Apollo. The New York-based private equity firm will also acquire most of the unit's employees. Radical Restructuring Yesterday, Credit Suisse said it is accelerating the radical restructuring of its investment bank by entering into «definitive transaction agreements» to sell what it says is a significant part of its securitized product group (SPG) to Apollo, as finews.com reported. The deal, along with the sale of other portfolio assets to third parties is expected to reduce the assets of the SPG from $75 billion to $20, billion according to the bank. The report did not give valuation details, and the companies declined to comment on the Sector Financial deal.

Credit Suisse Drops After SPG Sale to Apollo Leaves Questions- bloomberg com

Analysts point to lack of details in SPG asset sale to Apollo SPG sale is critical part of plans to cut investment bank risk Credit Suisse AG declined the most among major European banks after analysts pointed to the lack of financial details surrounding the agreed sale of a large part of its securitized products business to

Credit Suisse to Sell «Significant» Chunk of SPG- finews.com

As it continues its restructuring, Credit Suisse has agreed to sell a major chunk of its securitized products group to Apollo Global Management. It expects to release risk-weighted assets. Credit Suisse said it is accelerating the radical restructuring of its investment bank by entering into «definitive transaction agreements» to sell what it says is a significant part of its securitized product group (SPG) to Apollo Capital Management, the Swiss lender said in a statement Tuesday. The deal, along with the sale of other portfolio assets to third parties is expected to reduce the assets of the SPG from $75 billion to $20, billion according to the bank. Releasing RWAs Upon completing the transactions, a release of up to $10 billion of risk-weighted assets (RWA) is expected to be attained, according to the statement. Additionally, the $20 billion of remaining assets will generate income to support the exit from the SPG, to be managed by Apollo through a management relationship expected to last five years. Upon release of the RWAs, Credit Suisse is expected to strengthen its CET1 capital ratio, according to the statement. Headcount Moving Apollo is expected to hire the majority of the SPG team and will get help from Credit Suisse in transitioning employees to help ensure a seamless transition. Credit Suisse will also finance a porting of the assets that are transferred to Apollo. The deal is expected to close in the first half of 2023, subject to regulatory approvals, customer consent, and other customary closing conditions.