Credit Suisse Chief Executive Officer Brady Dougan (R)
Credit Suisse Group AG (CSGN), Switzerland’s second-biggest bank, said it plans to boost capital by 15.3 billion Swiss francs ($15.6 billion) by the end of the year after the Swiss central bank last month urged a “marked increase.” The shares rose as much as 6 percent.
The company will also cut an additional 1 billion francs in costs at the investment bank and private bank by the end of 2013, the Zurich-based bank said in an e-mailed statement Wednesday. Net income in the second quarter rose to 788 million francs from 768 million a year earlier, it said.
Credit Suisse Chief Executive Officer Brady Dougan said the capital measures, which include the sale of 3.8 billion-franc mandatory convertible notes, will almost double the bank’s capital ratio from the level at the end of the first quarter, which the Swiss National Bank said was below international peers. The bank is cutting more costs after announcing last year plans to cut 3,500 jobs and slash 2 billion francs in expenses, according to Bloomberg report.
“Concerns in the market about Credit Suisse’s capital position should take the backseat thanks to the measures announced today,” Andreas Venditti, an analyst at Zuercher Kantonalbank AG, wrote in a note to clients. “It’s positive in our view.”
Credit Suisse was up 5.5 percent to 18.08 francs in Zurich trading, after falling 22 percent this year through Tuesday.
The bank is implementing an immediate set of actions to increase capital by 8.7 billion francs. These include the sale of notes, which will convert into 234 million shares in March at the price of 16.29 per share, and will be fully underwritten by strategic investors.
Half of the notes will be bought directly by the strategic investors, including Qatar Holding LLC, Olayan Group and Norges Bank Investment Management and Temasek Holdings Pte Ltd., and the other half will be offered to Credit Suisse shareholders through subscription rights, the bank said.
The bank also plans to boost capital by an additional 6.6 billion francs by the end of the year through measures including 1.6 billion francs in divestments in asset management and real estate sales. It will also offer employees to buy shares in exchange for so-called Adjustable Performance Plan Awards, known as APPAs, that are tied to the bank’s return on equity and were issued as compensation in prior years.
“The measures we’ve announced today should remove any of the doubts raised by the Swiss National Bank’s report,” Dougan told reporters on a conference call. The measures “should completely put any capital questions to rest,” the CEO said.
The capital-raising plans will lead to a rapid and significant increase of Credit Suisse’s loss-absorbing capital and “substantially increase” the bank’s resilience, the Swiss central bank said today.
Dougan declined to provide details on whether new cost- cutting measures would impact headcount at the firm. He also said the bank is committed to dividends for shareholders. For 2012, the bank is currently accounting for an all scrip- dividend, he said