Credit Suisse to raise CHF 4 bn capital

8 years ago - Published in Finance, Fundamental Analysis

Credit Suisse has just reported first quarter earnings which show Switzerland's second-largest bank beating expectations, helped by a strong performance across the board. The bank simultaneously announced its intention to pursue a 4 billion swiss franc ($4 billion) capital raise.
It said the first quarter had provided "further confirmation" that it was delivering "profitable and complaint growth" and had "generated positive momentum across our businesses".

"The very deep, hard restructuring that we talked so much about in 2016 is finally producing some results with 10 percent return on capital which was our 2018 target for global markets which many people thought unachievable," CEO Tidjane Thiam stated.

On Wednesday, during its results announcement, Credit Suisse said "Under the terms of this rights offering, Credit Suisse Group AG intends to issue 379,981,340 new registered shares with a par value of CHF 0.04 each, which are firmly underwritten by a banking syndicate." 

Existing shareholders will be offered the new stock at a discount. If they do not take take it up, Deutsche Bank and Morgan Stanley have signed up as underwriters.

It has also unveiled a proposal to swap to an all-cash dividend in the future. This will mean that dividends paid in new shares won't dilute investors.

The capital increase, will, Credit Suisse hopes, enable the bank to continue to invest in profitable growth opportunities "where we generate attractive returns", as well as strengthen balance sheet resilience for its clients and other stakeholders. It will also help with the costs for its ongoing restructuring plans.

Looking to this quarter, the CEO said that nerves over political uncertainty due primarily to the French election has impacted the strength of market appetite.

"In terms of wealth management, net new assets (NNA) has remained strong in April, so we've seen those trends continue. For the rest of the market we will be quite cautious because April was very much impacted as we saw on Monday," Thiam explained, highlighting the buoyant trader reaction to independent centrist Emmanuel Macron, securing the highest level of votes in the first round of the election. "All markets were impacted in terms of level of activity in April," he added.