Credit Suisse attends Swiss business sales to raise capital

Credit Suisse is preparing to sell parts of its Swiss domestic bank as it tries to close a capital hole of about 4.5 billion Swiss francs, according to people familiar with the discussions.

With less than two weeks to go until the lender presented plans for a radical strategic revamp, executives are also in the final stages of planning a massive round of job cuts, which could affect up to 6,000 of the group’s 50,000 employees globally.

Ulrich Koerner was installed as CEO of Credit Suisse over the summer with a mandate to divest the investment bank of the embattled and accident-prone Swiss lender and find CHF1.5 billion in cost savings, after a series of scandals in recent years that saw the group’s share price hit record lows.

Although most attention has so far been focused on the dispositions of the Swiss lender’s investment bank – with executives confident of selling all or part of the lucrative securitized products business – the board has also turned its attention to raising funds by selling non-core parts of its domestic products. Business, known as the Swiss Universal Bank.

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

Parts considered for sale include: A stake in SIX Group, which operates the Zurich Stock Exchange. 8.6 percent stake in Allfunds, a Spanish listed investment company; two specialized 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 listed the company last year with a market capitalization of €7.2 billion. Since then, its shares have fallen by half, meaning Credit Suisse’s 8.6 percent stake is worth about CHF374 million.

The bank is also trying to sell a historic property, the two-century-old Savoy Hotel, the oldest large hotel in Zurich, facing the bank’s headquarters in Paradeplatz.

The luxury hotel, which is being renovated and is due to reopen in 2024, could be worth 500 million Swiss francs, according to people inside the bank.

The board has ruled out asset management and private banking disposals at Credit Suisse, according to people familiar with the plans, although it will continue to exit unprofitable small markets. This year, Credit Suisse has already withdrawn its wealth management operations in Mexico and Sub-Saharan Africa.

Analysts discussed the size of the capital gap that would result from the bank’s changes, with Goldman Sachs this week putting the figure at CHF8 billion.

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

The Bank’s Board of Directors and Executive Team evaluated each part of the business according to three main criteria: profitability, capital needs and importance to the wealth management business.

The New York-based securitized products business was assessed as requiring a lot of capital and little overlap with the wealth business, which will become the bank’s primary focus after the strategic review. The unit’s profitability made it easy to sell.

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

They confirmed interest from US investors Apollo Global Management, Pimco, Sixth Street Partners and Center Bridge Partners, as well as Japan’s Mizuho Financial Group, which was previously reported by Bloomberg and the Wall Street Journal.

JPMorgan analyst Kayan Abu Hussain raised his recommendation for Credit Suisse from underweight to neutral last week, saying he expects to sell off the securitized products business.

He predicted the unit would generate 1.2 billion Swiss francs of revenue in 2024, meaning its pre-tax profit of 400 million Swiss francs would make up the lion’s share of the investment bank’s total earnings of 700 million Swiss francs.

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

Additional reporting by Laura Noonan

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