Credit Suisse assures investors of its financial strength

Senior Credit Suisse executives reassured large clients, counterparties and investors over the weekend of the Swiss bank’s liquidity and capital position in response to concerns about its financial strength.

Executives called after the bank’s credit-default swap spreads rose sharply on Friday, a sign of investor concern over its financial health.

“These teams are actively engaging with our top clients and peers this weekend,” said a Credit Suisse executive involved in the discussions. “We have also received calls from top investors with supporting information.”

The executive denied recent news reports that Credit Suisse had formally reached out to investors about a possible raising of more capital, insisting the bank was trying to avoid such a move as its shares are at record lows and due to The downgrade has led to higher borrowing costs.

After seeing Credit Suisse shares fall more than 25 percent last month to below 4 Swiss francs, CEO Ulrich Körner sent a company-wide memo on Friday in an attempt to reassure employees about the bank’s capital position and liquidity .

But the stock came under pressure early Monday, down 9 percent to 3.61 francs in Zurich.

Körner’s move was also accompanied by a sharp rise in credit default swaps, a gauge of investor risk sentiment, which rose more than 50 basis points over the past two weeks to 250 basis points on Friday.

In a subsequent briefing, sent to Credit Suisse executives on Sunday on topics discussed with clients, following rumours on social media about the bank’s financial health, staff were told: “A number of stakeholders’ Concerns, including media speculation, continue to be our capital and financial strength.

“Our position on this is clear. Credit Suisse has a strong capital and liquidity position and balance sheet. Share price developments have not changed that fact.”

An executive at a company contacted by Credit Suisse said he believed the bank was “the worst big bank in Europe” but was not in immediate danger.

“We didn’t have a meeting on this topic,” he said. “I don’t see this as a crisis.” The executive said the bank’s decline reflected its deep troubles and lack of any obvious solution.

Ulrich Körner, CEO of Credit Suisse
Ulrich Körner, CEO of Credit Suisse: “There is no doubt that between now and the end of October, the market and the media will be louder. All I can tell you is to stay disciplined and work with your clients As close as a colleague. © Credit Suisse

Although the Swiss local bank is lucrative and the global private bank still has a strong brand, potential investors and buyers worry that the investment banking unit may be hiding expensive liabilities.

Korner and the bank’s board, chaired by former UBS executive Axel Lehmann, will present a plan to overhaul the business on Oct. 27 to address investor concerns about third-quarter results. worry.

Analysts at Deutsche Bank estimated last month that the restructuring would leave Credit Suisse’s capital position with a shortfall of 4 billion Swiss francs.

“We’re going to have asset sales and divestitures so that we can fund this very strong pivot of a stable business that we intend to achieve,” said the bank’s senior executive who participated in an investor call.

Credit Suisse declined to comment.

Korner, who ran Credit Suisse’s asset management business and was named chief executive this summer, has been tasked with spinning off the group’s investment bank and cutting costs — moves that could lead to thousands of layoffs.

According to the Financial Times, the board’s latest plan is to split the investment bank in three and recreate a “bad bank” for high-risk assets and business units designated for disposal.

“There will undoubtedly be more noise in the markets and the press between now and the end of October,” Kerner wrote on Friday. “All I can tell you is to stay disciplined and be as close to your clients as you are to your colleagues.”

Uncertainty over the bank’s future has led to the departure of some executives. Jens Welter, a former co-head of global banking, is the latest high-profile defector to agree to join Citigroup​​​.

Additional reporting by Master Brooke, New York

Video: Credit Suisse: What’s next for this crisis-hit bank? | FT Movies

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