credit suisse: Credit Suisse taps RBC, Morgan Stanley for possible capital hike

A little over a week before unveiling the crucial turnaround plan, Credit Suisse Group AG executives are examining every corner of the company for opportunities to raise funds – and preparing to reach out to outside investors should they need more.

The Zurich-based bank is working with the Royal Bank of Canada and Morgan Stanley on a possible capital increase should it need funds for its restructuring, according to people familiar with the matter. These discussions underpin efforts to divest some businesses, likely including large parts of the investment bank and possibly US wealth management.

A capital increase the bank is considering, dubbed “Project Ghana,” could come after the bank’s restructuring was formally announced on Oct. 27, the people said.

After years of scandals and billions of dollars in losses, investors have little certainty about what it will cost CEO Ulrich Körner to restore confidence in the traditional Swiss company. Analyst estimates ranged from $4 billion to $8 billion, although executives may try to keep the number lower initially amid volatile markets and low valuations.

If Credit Suisse pulled the trigger for a capital raise, it would likely target at least $2 billion to cover the restructuring and any operating losses over the next few years as it transitions the business, the people said.

“A CHF6 billion capital hole needs to be plugged to restructure operations, absorb regulatory requirements, support growth and hedge against the unknown,” KBW analysts, including Tom Hallett, wrote in a note. “We don’t believe that selling assets alone can do that, especially in the current environment.”

Morgan Stanley, Royal Bank of Canada and Credit Suisse declined to comment. Credit Suisse shares rose as much as 4.3% on Tuesday, rising 1.8% to 4.62 Swiss francs as of 5:25 p.m. in Zurich (8:55 p.m. IST), suggesting investors are a capital increase as less dilutive than some might have expected.

Credit Suisse has already reached out to the Qatar Investment Authority and others to gauge interest in a possible capital injection, people familiar with the matter said earlier. Other Middle East funds, such as Abu Dhabi’s Mubadala Investment Co. and Saudi Arabia’s Public Investment Fund, are weighing whether to pour money into their investment banking arm or other businesses, the people said.

https://economictimes.indiatimes.com/markets/stocks/news/credit-suisse-taps-rbc-morgan-stanley-for-possible-capital-hike/articleshow/94953098.cms credit suisse: Credit Suisse taps RBC, Morgan Stanley for possible capital hike

Russell Falcon

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