Credit Suisse prepares Swiss business sales to raise capital

Credit Suisse is due to unveil its new strategy later this month. © Keystone / Michael Buholzer

Credit Suisse is preparing to sell parts of its Swiss domestic bank as it attempts to close a capital hole of around CHF4.5 billion, according to people briefed on the discussions.

With less than two weeks until the lender is due to present plans for a radical strategic revamp, executives are also in the final stages of plotting a heavy round of job cuts, which could affect up to 6,000 of the group’s 50,000 global employees.

Ulrich Körner was installed as Credit Suisse chief executive over the summer with a mandate to strip back the beleaguered Swiss lender’s accident-prone investment bank and find CHF1.5 billion of cost savings, following a succession of scandals in recent years that has seen the group’s share price hit record lows.

Though most attention so far has focused on disposals from the Swiss lender’s investment bank — with executives confident of selling all or part of the profitable securitised products business — the board has also turned its attention to raising funds by selling non-core parts of its domestic business, known as the Swiss Universal Bank.

While the main domestic operation — which offers a range of corporate, private and retail banking services in Switzerland — will remain intact, the company is negotiating the sale of several subsidiaries and stakes in other businesses.

Hotel sale

The parts that have been considered for sale include: a stake in the SIX Group, which runs the Zurich stock exchange; an 8.6% holding in Allfunds, a listed Spanish investment company; two specialist Swiss banks, Pfandbriefbank and Bank-Now; and Swisscard, a joint venture with American Express.

Credit Suisse has held a stake in Allfunds since 2019 and the business listed last year with a market capitalisation of €7.2 billion. Since then, its shares have fallen by half, meaning Credit Suisse’s 8.6% stake is worth around CHF374 million.

The bank is also trying to sell a landmark property, the two-century-old Savoy, Zurich’s oldest grand hotel, which faces the bank’s headquarters in Paradeplatz.

The luxury hotel, which is being refurbished and is due to reopen in 2024, could be worth CHF500 million, according to people within the bank.

Restructuring costs

The board has ruled out disposals from Credit Suisse’s asset management and private banking businesses, according to people with knowledge of the plans, though it will continue to exit small, unprofitable markets. Credit Suisse this year has already pulled back its Mexican and sub-Saharan African wealth management operations.

Analysts have debated the size of the capital hole that will result from the changes the bank is pushing through, with Goldman Sachs this week putting the figure at CHF8 billion.

But the bank’s board is confident it will be around CHF4 billion to CHF4.5 billion, after taking restructuring and legal costs into account, according to people familiar with the plans.

The bank’s board and executive team have been assessing each part of the business on three main criteria: profitability, capital needs and importance to the wealth management business.

The New York-based securitised products business has been assessed as requiring too much capital and having little overlap with the wealth business, which will become the bank’s core focus after the strategic review. The unit’s profitability has made it an easier business to sell.

Interest from buyers

People involved in discussions over the unit said they were confident of agreeing a sale by October 27 and were considering bids from several suitors, which ranged from buying the whole division to parts of it.

They confirmed there had been interest from US investors Apollo Global Management, Pimco, Sixth Street Partners and Centerbridge Partners, as well as Japanese bank Mizuho Financial Group, which had previously been reported by Bloomberg and the Wall Street Journal.

JPMorgan analyst Kian Abouhossein upgraded his recommendation on Credit Suisse from underweight to neutral last week, saying he expected the securitised products business to be sold.

The unit, he forecast, would produce CHF1.2 billion of revenue in 2024, meaning its pre-tax profit of CHF400 million would account for the lion’s share of the investment bank’s total CHF700 million of profit.

Credit Suisse declined to comment, saying it would provide a full update on the strategic plan on October 27.

Copyright The Financial Times Limited 2022