Credit Suisse is preparing to sell parts of its Swiss house bank to close a capital shortfall of around CHF 4.5 billion, according to the discussions.
With less than two weeks to go before the lender is due to unveil plans for a radical strategic realignment, executives are also in the final stages of planning a sweeping job cut that could affect up to 6,000 of the group’s 50,000 employees worldwide.
Ulrich Körner was appointed chief executive of Credit Suisse in the summer with a mandate to downsize the ailing Swiss lender’s accident-prone investment bank and deliver CHF1.5 billion in cost savings after a spate of scandals in recent years The group had gone at a cost, price hit record lows.
Although most attention so far has focused on divestitures of the Swiss lender’s investment bank – with executives confident of selling all or part of its profitable securitized products business – the board has also turned its attention to raising funds by he sells non-core parts of his domestic company known as the Swiss Universal Bank.
While its main domestic operation, which offers a range of corporate, retail and retail banking services in Switzerland, remains in place, the company is in negotiations to sell several subsidiaries and equity interests in other companies.
Portions for sale include: a stake in SIX Group, which operates the Zurich Stock Exchange; an 8.6 percent stake in Allfunds, a Spanish public investment company; two Swiss specialist banks, Pfandbriefbank and Bank-Now; and Swisscard, a joint venture with American Express.
Credit Suisse has had a stake in Allfunds since 2019 and the company was listed last year with a market capitalization of €7.2 billion. Since then, the share has halved, meaning that Credit Suisse’s 8.6 percent stake is worth around CHF 374 million.
The bank is also trying to sell a landmark property, the two-century-old Savoy, Zurich’s oldest grand hotel, which sits opposite the bank’s headquarters on Paradeplatz.
The luxury hotel, which is being renovated and is due to reopen in 2024, could be worth 500 million francs, according to the bank.
The board of directors has ruled out divestitures of Credit Suisse’s wealth management and private banking businesses, although the company will continue to exit small, unprofitable markets, according to people with knowledge of the plans. Credit Suisse has already scaled back its wealth management activities in Mexico and sub-Saharan Africa this year.
Analysts have debated the size of the capital hole that will result from the changes the bank is enforcing, with Goldman Sachs this week putting the figure at SFr8 billion.
However, the bank’s board of directors is confident it will be around CHF4 billion to CHF4.5 billion after accounting for restructuring and legal costs, according to people familiar with the plans.
The bank’s board and executive team have evaluated each part of the business against three key criteria: profitability, capital requirements and relevance to the wealth management business.
The New York-based securitized products business was deemed overly capital intensive and has little overlap with the wealth business, which will become the bank’s core business after the strategic review. The profitability of the unit has facilitated the sale.
People involved in discussions about the unit said they were confident of agreeing to a sale by Oct. 27, and reviewed offers from several suitors, ranging from buying the entire division to parts of it.
They confirmed interest from US investors Apollo Global Management, Pimco, Sixth Street Partners and Centerbridge Partners, as well as Japanese bank Mizuho Financial Group, previously reported by Bloomberg and the Wall Street Journal.
JPMorgan analyst Kian Abouhossein upgraded his rating on Credit Suisse to neutral from underweight last week, saying he expects the securitized products business to be sold.
The unit, he predicted, would post sales of 1.2 billion Swiss francs in 2024, meaning its pre-tax profit of 400 million Swiss francs would account for the lion’s share of the investment bank’s total profit of 700 million Swiss francs.
Credit Suisse declined to comment and said it would provide a full update of the strategic plan on October 27.
Additional reporting by Laura Noonan
