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Credit Suisse shareholders overwhelmingly approved a plan to raise 4 billion francs ($4.2 billion) on Wednesday. The capital raising plans are split into two parts. The first, which was backed by 92% of shareholders, grants shares to new investors including the Saudi National Bank via a private placement. The new share offering will see the SNB take a 9.9% stake in Credit Suisse, making it the bank’s largest shareholder.
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The approval came after Credit Suisse on Wednesday announced it expects a pre-tax loss of up to 1.5 billion Swiss francs ($1.58 billion) in its fourth quarter, saying the "challenging" economic and market environment had an adverse effect on client activity across its business. The warning sent Credit Suisse's shares reeling, with the stock down 4.8% in morning trading, while the cost of insuring the bank's debt against default also rose.
Why it matters
The equity raise comes at a time to help turn the fortunes around of the embattled Swiss bank - which was saddled with losses. Despite being dubbed too big to fail the multi-year transformation aims to shift billions of dollars of risk-weighted assets from the persistently underperforming investment bank to the wealth management and domestic divisions, and to reduce the group’s cost base by 2.5 billion, or 15%, by 2025. The new share offering will also fund an overhaul which will see it cut thousands of jobs and scale back its investment bank, Credit Suisse had drawn up a plan that would give new and existing shareholders the chance to buy new shares.
