Credit Suisse Completes $4.3B Fund Raising, Turnaround Plan 'Well Underway'

Credit Suisse got a positive market reaction on Friday after the embattled bank successfully completed the final part of its 4 billion Swiss franc ($4.28 billion) fund raising and said its liquidity levels had been boosted.

Its shares opened 2.5% higher after Switzerland's second biggest bank said cost cuts were well under way, while its liquidity ratios had improved – a concern after outflows of client funds in recent weeks.

Chief Executive Ulrich Koerner hailed the "important strides" made since the bank outlined its turnaround plan on Oct. 27.

"The successful completion of the capital increase is a key milestone for the new Credit Suisse," Koerner said in a statement on Thursday.

"It will allow us to further support our strategic priorities from a position of capital strength and create a simpler, more stable and more focused bank built around client needs, and generating value for shareholders," he added.

Shareholders exercised 98.2% of their subscription rights, giving a boost to managers tasked with getting the bank back on track after the biggest crisis in its 166-year history.

Gross proceeds of rights offering, the second part of Credit Suisse's fund raising, were 2.24 billion francs.

Credit Suisse had already raised 1.8 billion francs by placing stock with a group of institutional investors led by Saudi National Bank, taking the total funds raised to 4 billion francs.

The entire capital raising will raise Credit Suisse's CET1 capital ratio by roughly 140 basis points, it said, to around 14% from 12.6% at the end of the third quarter.

The bank also said it expects to complete the sale of its Securitized Products Group to Apollo Capital Management in the first half of 2023.

The bank has also issued around 5 billion francs of new debt since Oct. 27, which along with the capital hike has strengthened its spot liquidity coverage ratio to above 140%, it added.

"The bank's cost transformation remains well underway," Credit Suisse said, saying plans already launched will reach most of its 2023 goal to save 1.2 billion francs.

"We take a positive view of the fact that the cost reduction initiatives launched will cover around 80% of the 2023 target," said Zuercher Kantonalbank analyst Christian Schmidiger.

Source: Financial Post