Arnd Wiegman | Reuters
Credit Suisse Shareholders on Wednesday approved a 4 billion Swiss francs ($4.2 billion) capital raise aimed at funding the ailing lender’s massive strategic overhaul.
Credit Suisse’s capital raising plans are divided into two parts. The first, supported by 92% of shareholders, grants shares to new investors including the Saudi National Bank through a private placement. The new share offering will see the SNB acquire a 9.9% stake in Credit Suisse, making it the bank’s largest shareholder.
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SNB chairman Ammar AlKhudairy told CNBC in late October that the stake in Credit Suisse had been acquired at “rock bottom” and urged the Swiss lender “not to blink” at its sweeping restructuring plans.
The second capital increase issues newly nominated shares with pre-emption rights to existing shareholders, and was approved with 98% of the votes.
Credit Suisse chairman Axel Lehmann said the vote marked an “important step” in building the “new Credit Suisse”.
“This vote confirms confidence in the strategy, as we presented it in October, and we are fully focused on delivering on our strategic priorities to lay the foundations for future profitable growth,” said Lehmann.
Credit Suisse on Wednesday forecast a loss of 1.5 billion Swiss francs ($1.6 billion) for the fourth quarter as it begins its second strategic overhaul in less than a year aimed at streamlining its business model to focus on its asset management division and the Swiss domestic market.
Restructuring plans include the sale of part of the bank’s Securitized Products Group (SPG) to US investment firms PIMCO and Apollo Global Management, as well as downsizing its ailing investment bank through a capital markets spin-off and the consulting unit, which will be renamed CS First Boston.
The multi-year transformation aims to shift billions of dollars of risk-weighted assets from the consistently underperforming investment bank to the asset management and domestic divisions and reduce the group’s cost base by $2.5 billion, or 15%, by 2025.
“Too big to fail” but more transparency is needed
Vincent Kaufman, CEO of the Ethos Foundation, which represents hundreds of Swiss pension funds that are active shareholders of Credit Suisse, expressed disappointment ahead of Wednesday’s vote that the group is no longer considering a partial IPO of the bank Swiss national team, which he said would have “sent a stronger message to the market”.
Despite the stock dilution, Kaufman said the Ethos Foundation would support issuing new shares to existing shareholders as part of the capital raise, but opposed the private placement for new investors, primarily the SNB.
“The non-preemptive capital increase to new investors exceeds our dilution limits set out in our voting guidelines. I have had discussions with many of our members and they all agree that the dilution is too high,” he said. said.
“We are in favor of the part of the capital increase with pre-emption rights, still believing that any partial IPO of the Swiss division would also have been a possibility to increase the capital without having to dilute the existing shareholders to that level, therefore we are not in favor this first tranche of the capital increase without pre-emption rights”.
At Credit Suisse’s annual general meeting in April, the Ethos Foundation tabled a shareholder resolution on the climate strategy, and Kaufman said he was concerned about the direction it would take with the bank’s new major shareholders.
“Credit Suisse remains one of the largest lenders to the fossil fuel industry, we want the bank to reduce its exposure, so I’m not sure this new shareholder will favor such a strategy. sustainability will be diluted among these new shareholders,” he said.
Wednesday’s meeting was not broadcast, and Kaufman slammed the Credit Suisse board for proposing a capital raise and hiring new outside investors “without regard to existing shareholders” or inviting them to the meeting.
He also raised questions about the “conflict of interest” between board members, with board member Blythe Masters also serving as an advisor to Apollo Global Management, which is buying a part of Credit Suisse’s SPG, and board member Michael Klein is expected to head up the new trading and advisory unit, CS First Boston. Klein will step down from the board to launch the new business.
“If you want to restore confidence, you have to do it clean and that’s why we’re still not convinced. Again, a stronger message with a Swiss home bank IPO would have reassured at least the pension funds we’re advising,” he said. said.
However, Kaufman stressed that he is not concerned about Credit Suisse’s long-term viability, classifying it as “too big to fail” and highlighting the bank’s strong capital buffers and reduced outflows.