On Thursday, the bank said it had placed banknotes that would turn into shares in six months to counteract its deteriorating capital position due to the loss and new taxes imposed by the Swiss financial regulator. The offer will be based on the bank’s share price in the coming days and could raise nearly $ 2 billion in fresh capital.
He said there was only a small exposure left in Archegos since Wednesday after selling 97% of its related positions, but lost another $ 655 million in the fund in the second quarter, adding a $ 4.7 billion tax. dollars in the first quarter.
Switzerland’s financial regulator Finma said on Thursday it had opened enforcement proceedings against the bank over how it managed the risks surrounding Archegos.
Credit Suisse shares fell by up to 5% following news of the capital increase. Its shares have plunged by about a third since the end of February, even though banking stocks have generally performed well due to the savings recovered from the Covid-19 blockades.
Amortizing the blow from Archegos, Credit Suisse had a strong quarter as investment banking grew on Wall Street. The bank is a leading sponsor of special purpose procurement companies or SPAC, a booming corner of the fundraising world.
Revenue at the second largest bank in Switzerland by assets after UBS Group AG
UBS -0.71%
increased 31% to about $ 8.3 billion in customer activity in growing markets. Its loss for that quarter was 252 million Swiss francs, or about $ 275 million.
Revenues at the investment bank Credit Suisse increased by 80%, stimulated by corporate transactions and the sale of shares and bonds. Credit Suisse said its wealth management business, which is not reported as a single division, brought in revenue of about $ 4.23 billion, up 3% from the previous year.
But the bank’s ability to generate excessive profits in its future investment bank is overshadowed by the massive loss in Archegos. To prevent future explosions, the bank said it would resize its main brokerage operations serving hedge funds and family offices.
However, he did not signal a full withdrawal, noting that he will focus on key customers. As a sign that it is not willing to significantly reduce the investment bank, it will target a measure of its assets in that division at the levels of the end of 2020.
Credit Suisse was the hardest hit lender for Archegos, a US family investment firm that has bet heavily on a few shares with borrowed money. The Wall Street Journal reported on Wednesday that the bank had accumulated $ 20 billion in exposure to Archegos-related investments, but struggled to monitor them.
Credit Suisse was the most affected lender of Archegos, a US family-owned investment firm that bet heavily on a few shares of borrowed money. Other banks also lost money when Archegos failed to cope with margin calls, but were able to leave positions sooner. The fund’s problems came just weeks after Credit Suisse warned that losses could be significant from the collapse of another bank client, Greensill Capital, with which Credit Suisse managed a $ 10 billion set of investment funds.
Finma also said it has opened enforcement proceedings in Greensill funds. Credit Suisse said it had taken out a loan from Greensill, but said it did not intend to compensate investors who had placed their money in the funds.
“We did not compensate the investors in these funds. They are third-party investors, “said David Mathers, chief financial officer of Credit Suisse.
Archegos and Greensill’s double blow is the bank’s biggest test in recent years and comes in a period of leadership transition. Thomas Gottstein took over as executive director a year ago after his predecessor, Tidjane Thiam, was forced out after the bank was caught spying on a recently retired executive.
The bank’s longtime chairman, Urs Rohner, will retire after an annual shareholders’ meeting next week. He will be replaced by an outsider, Lloyds Banking Group PLC CEO António Horta-Osório.
On Thursday, Mr Gottstein said the loss of Archegos was unacceptable. The bank reduced its dividend and removed its heads of risk, bank investment and equities. Its board and regulators are reviewing what went wrong.
Credit Suisse said it is strengthening risk control in the main brokerage unit that served Archegos, adding that it expects to reduce the size of its hedge fund business.
Credit Suisse said a major measure of resilience, its Tier 1 equity ratio, fell to 12.2% from 12.9% at the end of December. It places about 203 million new shares in investors through convertible banknotes, which will bring the ratio back to 13%.
Write to Margot Patrick at [email protected]
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