Newspaper article International New York Times

Credit Suisse to Raise $6.3 Billion in New Capital ; Chief Intends to Shrink Investment Bank and Aim for Emerging Markets

Newspaper article International New York Times

Credit Suisse to Raise $6.3 Billion in New Capital ; Chief Intends to Shrink Investment Bank and Aim for Emerging Markets

Article excerpt

As part of a significant overhaul, the bank said it would further shrink its investment bank and try to expand operations in Asia and emerging markets.

Credit Suisse said Wednesday that it planned to raise up to $6.3 billion in new capital, shrink its investment bank and slash costs in the first major move by Tidjane Thiam, the bank's new chief executive.

The bank, based in Zurich, is betting on future growth in Asia and other emerging markets, saying it would bolster its private banking and wealth management operations in those markets. It also said it would seek to publicly list part of its Swiss banking operations, but that it would retain control of the business.

The announcement came as Credit Suisse reported a weaker-than- expected profit in the third quarter as uncertain market conditions weighed on its fixed-income and trading operations. Its investment banking rivals in the United States, including Goldman Sachs, JPMorgan Chase and Morgan Stanley, also registered lower trading revenue in the quarter.

Credit Suisse said its third-quarter profit had declined 24 percent to 779 million Swiss francs, or about $816 million. That is down from 1.03 billion francs in the period a year earlier.

"Our third-quarter results reinforce the need for a restructuring of the bank aimed at reducing the volatility of our earnings and better aligning the activities of our investment bank behind the needs of the clients of our private banking and wealth management division," Mr. Thiam said in a news release.

Mr. Thiam, the former chief executive of the British insurer Prudential, took the top job at Credit Suisse on July 1, succeeding Brady W. Dougan, an American who had led the Swiss bank since before the financial crisis.

Mr. Thiam inherited a bank that is facing steeper capital requirements by regulators and that has been criticized for not decreasing the size of its investment bank operations as aggressively as some of its rivals, like UBS.

Mr. Thiam said that Credit Suisse was in the process of "right- sizing" its investment bank as it looks to reduce capital used by that business.

The capital increase announced on Wednesday was widely expected but not as steep as some analysts had expected.

Credit Suisse said that it planned to raise up to 6.05 billion francs through two share offerings. The bank also said it planned to further reduce its costs by 3.5 billion francs by the end of 2018 and would invest about 1.5 billion francs from those savings to support growth in other parts of the bank.

The credit ratings agency Moody's Investors Service placed Credit Suisse's long-term debt ratings under review for a possible downgrade after the announcement.

As part of the changes, Credit Suisse said it planned to expand its universal bank in Switzerland and its private banking and wealth management arm in Africa, Asia, Eastern Europe, Latin America and the Middle East. …

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