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Luke Hickmore, ABRDN Investment director, joins ‘Squawk on the Street’ to discuss the stock sell-off in European banks and risk in the sector.
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Tag: Credit Suisse Group AG
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Financial shares fall as Credit Suisse becomes latest crisis for the sector
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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, March 13, 2023.
Brendan McDermid | Reuters
Bank stocks were under pressure on Wednesday as the sharp drop of Credit Suisse rattled a segment of the market that was already reeling from two large bank failures in the past week.
Shares of the Swiss bank fell more than 27% after its biggest backer said it won’t provide further financial support. Credit Suisse announced on Tuesday that it had found “material weakness” in its financial reporting process from prior years. Other European banks also slid, including an 8% drop for Deutsche Bank.
The move appeared to be hitting large U.S. banks as well. Shares of Wells Fargo and Citi fell more than 4% each in premarket trading, while Bank of America dipped 3%. JPMorgan and Goldman shed more than 2%.
Shares of Wells Fargo were under pressure on Wednesday.
Credit Suisse struggles come on the heels of the collapse of Silicon Valley Bank and Signature Bank in the U.S. Those failures caused steep sell-offs in regional bank stocks on Monday. The SPDR S&P Regional Bank ETF (KRE) fell more than 4% in premarket trading on Wednesday. Zions Bancorp and Western Alliance each fell more than 6%.
While Credit Suisse’s struggles appear unrelated to the mid-tier U.S. banks, the combination of the two issues could spark a broader reexamination of the banking system among investors, according to Peter Boockvar of Bleakley Financial Group.
“What this is telling us is there’s the potential for just a large credit extension contraction that banks are going to embark on [to] focus more on firming up balance sheets and rather than focus on lending,” Boockvar said on CNBC’s “Squawk Box.”
“It’s a balance sheet rethink that the markets have. Also you have to wonder with a lot of these banks if they’re going to have to start going out and raising equity,” he added.
In that vein, Wells Fargo on Tuesday filed to raise $9.5 billion of capital through the sale of debt, warrants and other securities. The bank said the new cash will be used for general corporate purposes.
The fallout from the collapse of SVB could also lead to more regulation and rising costs for the U.S. banking sector, including the potential for higher fees to regulators to pay for deposit insurance.
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Credit Suisse shares slide 21%, trading halted after Saudi backer rules out further assistance
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Credit Suisse on Thursday announced that it will delay the publication of its 2022 annual report.
Stefan Wermuth | Bloomberg | Getty Images
Shares of embattled bank Credit Suisse on Wednesday hit another all-time low for a second consecutive session, dropping by more than 21% shortly before being halted from trade.
Credit Suisse’s largest investor, Saudi National Bank, said it could not provide the Swiss bank with any further financial assistance, according to a Reuters report.
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“We cannot because we would go above 10%. It’s a regulatory issue,” Saudi National Bank Chairman Ammar Al Khudairy told Reuters Wednesday.
Several Italian banks were also subject to automatic trading stoppages after sharp declines, including UniCredit, Finecobank and Monte Dei Paschi.
Investors are also continuing to assess the impact of the bank’s Tuesday announcement that it had found “material weaknesses” in its financial reporting processes for 2022 and 2021.
The embattled Swiss lender disclosed the observation in its annual report, which was initially scheduled for last Thursday, but was delayed by a late call from the U.S. Securities and Exchange Commission (SEC).
The SEC conversation related to a “technical assessment of previously disclosed revisions to the consolidated cash flow statements in the years ended December 31, 2020, and 2019, as well as related controls.”
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Credit Suisse to delay publication of 2022 annual report on SEC comments
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Credit Suisse Group AG said Thursday that it will delay the publication of its 2022 report after a late call from U.S. market regulators over 2019 and 2020 cash-flow statements, adding a further headache as the lender attempts to woo back clients amid a costly turnaround effort.
The Swiss bank
CSGN,
-5.57% CS,
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said it received a call from the U.S. Securities and Exchange Commission on Wednesday in relation to certain open SEC comments about the technical assessment of previously disclosed revisions to its consolidated cash-flow statements in the 2020 and 2019 fiscal years as well as related controls.“Management believes it is prudent to briefly delay the publication of its accounts in order to understand more thoroughly the comments received,” Credit Suisse said.
The company said it wouldn’t affect its 2022 financial results released early in February.
Credit Suisse’s share price hit a low in the weeks since the 2022 results on uncertainty about its future, with analysts fearing that recent large outflows from customers will hinder a recovery.
Write to Ed Frankl at edward.frankl@wsj.com
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Credit Suisse to delay its 2022 annual report after a ‘late call’ from the SEC
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Workers pass a Credit Suisse Group AG bank branch in Geneva, Switzerland, on Thursday, Sept. 1, 2022.
Jose Cendon | Bloomberg | Getty Images
Credit Suisse on Thursday announced that it will delay the publication of its 2022 annual report after a late call from the U.S. Securities and Exchange Commission on Wednesday night.
In a statement, the embattled Swiss lender said the conversation related to SEC comments about the “technical assessment of previously disclosed revisions to the consolidated cash flow statements in the years ended December 31, 2020, and 2019, as well as related controls.”
“Management believes it is prudent to briefly delay the publication of its accounts in order to understand more thoroughly the comments received. We confirm the 2022 financial results as previously released on February 9, 2023, are not impacted by the above,” the bank said.
The annual report was scheduled for release on Thursday morning. On Feb. 9, Credit Suisse reported a massive 2022 full-year net loss of 7.3 billion Swiss francs ($7.8 billion) and telegraphed another “substantial” full-year loss for this year.
The bank in October announced a plan to simplify and transform its business in a bid to return to stable profitability, following chronic underperformance in its investment bank and a litany of risk and compliance failures.
In late February, Swiss regulator FINMA concluded that Credit Suisse “seriously breached its supervisory obligations” regarding a business relationship with collapsed supply chain finance firm Greensill Capital.
Credit Suisse shares closed Wednesday’s trade at around 2.68 Swiss francs per share, down 3.22% since the start of the year, and are expected to fall further at market open on Thursday.
This is a developing story and will be updated shortly.
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Credit Suisse Group Trims Fulgent Genetics (NASDAQ:FLGT) Target Price to $45.00
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Fulgent Genetics (NASDAQ:FLGT – Get Rating) had its price objective trimmed by Credit Suisse Group from $50.00 to $45.00 in a research report report published on Thursday morning, The Fly reports. The firm currently has an outperform rating on the stock.
Several other research analysts also recently weighed in on FLGT. Piper Sandler downgraded shares of Fulgent Genetics from an overweight rating to a neutral rating and decreased their target price for the company from $65.00 to $40.00 in a research note on Thursday, December 8th. Raymond James initiated coverage on shares of Fulgent Genetics in a research note on Friday, November 18th. They set an outperform rating and a $45.00 price objective on the stock. Two equities research analysts have rated the stock with a hold rating and two have issued a buy rating to the company’s stock. Based on data from MarketBeat, Fulgent Genetics has a consensus rating of Moderate Buy and a consensus price target of $43.33.
Fulgent Genetics Trading Up 1.0 %
Shares of FLGT stock opened at $33.74 on Thursday. The company has a market capitalization of $996.00 million, a PE ratio of 7.40 and a beta of 1.61. The firm has a fifty day simple moving average of $32.36 and a 200-day simple moving average of $36.40. Fulgent Genetics has a twelve month low of $28.53 and a twelve month high of $65.32.
Institutional Trading of Fulgent Genetics
A number of large investors have recently modified their holdings of the company. BlackRock Inc. increased its holdings in shares of Fulgent Genetics by 4.5% in the 3rd quarter. BlackRock Inc. now owns 3,484,339 shares of the company’s stock worth $132,825,000 after acquiring an additional 149,014 shares during the period. Vanguard Group Inc. increased its holdings in shares of Fulgent Genetics by 2.4% in the 3rd quarter. Vanguard Group Inc. now owns 1,365,736 shares of the company’s stock worth $52,062,000 after acquiring an additional 32,173 shares during the period. Dimensional Fund Advisors LP increased its holdings in shares of Fulgent Genetics by 17.3% in the 4th quarter. Dimensional Fund Advisors LP now owns 798,326 shares of the company’s stock worth $23,776,000 after acquiring an additional 117,504 shares during the period. State Street Corp increased its stake in Fulgent Genetics by 5.3% during the 3rd quarter. State Street Corp now owns 756,357 shares of the company’s stock valued at $28,832,000 after buying an additional 38,121 shares during the period. Finally, Park West Asset Management LLC increased its stake in Fulgent Genetics by 152.0% during the 2nd quarter. Park West Asset Management LLC now owns 629,882 shares of the company’s stock valued at $34,347,000 after buying an additional 379,882 shares during the period. Institutional investors and hedge funds own 43.22% of the company’s stock.
About Fulgent Genetics
Fulgent Genetics, Inc is a technology company, which engages in the provision of gene testing and sequencing solutions. It offers genes and panels, known mutation, hereditary cancer, carrier screening, and tumor profiling solutions. The company was founded on May 13, 2016 and is headquartered in Temple City, CA.
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Credit Suisse ‘seriously breached’ obligations in Greensill case, Swiss regulator says
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The logo of Credit Suisse Group in Davos, Switzerland, on Monday, Jan. 16, 2023.
Bloomberg | Bloomberg | Getty Images
Credit Suisse “seriously breached its supervisory obligations” in the context of its business relationship with financier Lex Greensill and his companies, Swiss regulator FINMA concluded Tuesday.
The embattled Swiss lender’s exposure to the London-based Greensill Capital resulted in massive reimbursements to investors after the supply chain finance firm collapsed in early 2021.
“In its proceedings, FINMA concluded that Credit Suisse Group seriously breached its supervisory duty to adequately identify, limit and monitor risks in the context of the business relationship with Lex Greensill over a period of years,” the regulator said, adding that it also found “serious deficiencies in the bank’s organisational structures” during the period under investigation.
“Furthermore, it did not sufficiently fulfil its supervisory duties as an asset manager. FINMA thus concludes that there has been a serious breach of Swiss supervisory law.”
Credit Suisse CEO Ulrich Körner welcomed the conclusion of the FINMA investigation in a statement Tuesday.
“This marks an important step towards the final resolution of the SCFF issue. FINMA’s review has reinforced many of the findings of the Board-initiated independent review and underlines the importance of the actions we have taken in recent years to strengthen our Risk and Compliance culture. We also continue to focus on maximizing recovery for fund investors,” he said.
In March 2021, Credit Suisse closed four supply chain finance funds at short notice related to Greensill companies. The funds were distributed to qualified investors with client documentation indicating low risk, and client exposure sat at around $10 billion at the time of the closure.
The Greensill saga was a key reason behind Credit Suisse’s massive overhaul of its risk management and compliance operations, alongside the collapse of Archegos Capital.
Credit Suisse highlighted that, since March 2021, it has undergone senior management changes, implemented disciplinary measures and a new global accountability model, increased governance oversight and strengthened controls by moving risk oversight into a dedicated divisional risk management function.
FINMA announced Tuesday that it has ordered remedial measures and opened four enforcement proceedings against former Credit Suisse managers.
“In future, the bank will have to periodically review at executive board level the most important business relationships (around 500) in particular for counterparty risks,” the regulator said.
“In addition, the bank is required to record the responsibilities of its approximately 600 highest-ranking employees in a responsibility document.”
Credit Suisse noted that all of the requirements identified by the regulator “are being addressed through the organizational measures already underway.”
“FINMA has not ordered any confiscation of profits in connection with the proceedings and the implementation of the additional measures is not expected to result in significant costs for Credit Suisse,” the bank added.
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Goldman Sachs CEO says odds of a ‘softer landing’ for U.S. economy have improved
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David Solomon, Chairman & CEO of Goldman Sachs, speaking on Squawk Box at the WEF in Davos, Switzerland on Jan. 23rd, 2023.
Adam Galica | CNBC
Goldman Sachs CEO David Solomon said Tuesday that the odds the U.S. economy can avoid a deep recession this year seem to have improved.
While Solomon cautioned that uncertainty is high, in particular because of inflation and growing tensions between China and the U.S., business leaders seemed to be more optimistic than last year, he told investors at a Credit Suisse conference in Miami.
“I think it’s going to be, you know, a twisty, turn-y kind of road to navigate through this and get to the other side, but I think the chance of a softer landing feels better now than it felt six to nine months ago,” Solomon said.
Markets have rallied this year as inflation moderated and job growth remains strong, feeding investors’ hope that the economy can stick the elusive soft landing with, at worst, a shallow recession. As a result, capital markets activity has improved from a difficult 2022 that saw a steep drop in IPOs and debt and equity issuance.
“Clearly the market has a sense that we’re putting inflation in the rearview mirror,” Solomon said.
The CEO spoke before the release of Labor Department data showing that the consumer price index rose 0.5% in January, which translated to an annual gain of 6.4%.
Although Solomon said inflation was still a deterrent to growth and corporate investment, he cited improving sentiment among other CEOs as the basis of his measured optimism. New York-based Goldman is one of the world’s top advisors when it comes to mergers and tapping capital markets.
“Consensus has shifted to be a little bit more dovish in the CEO community, that we can navigate through this in the United States with a softer economic landing,” he said.
The American consumer has been “much more resilient than people expected” so far, he added.
During the wide-ranging interview conducted by Credit Suisse analyst Susan Roth Katzke, Solomon said that Goldman has a “much tighter hiring plan” this year after laying off about 3,200 workers last month.
While Solomon said he’s open to making acquisitions, especially in the asset and wealth management sector, the bar is very high to making a deal.
The CEO is scheduled to address investors again on Feb. 28 at the bank’s second-ever investor day. The last one was in early 2020.
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Credit Suisse posts massive annual loss, CEO describes results as ‘completely unacceptable’
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Credit Suisse on Thursday reported a fourth-quarter and annual net loss that missed expectations, as the Swiss bank continued with its huge strategic overhaul.
The lender’s fourth-quarter net loss attributable to shareholders came in at 1.4 billion Swiss francs ($1.51 billion), worse than analyst projections of a loss 1.32 billion Swiss francs, according to Eikon.
It took the embattled Swiss lender’s full-year loss to 7.3 billion Swiss francs, worse than the 6.53 billion Swiss franc loss expectation by analysts. Shares were down 14% on Thursday afternoon.
Credit Suisse is telegraphing another “substantial” full-year loss in 2023 before returning to profitability in 2024.
CEO Ulrich Koerner told CNBC on Thursday that the full results were “completely unacceptable,” but underscored the need for the ongoing multi-year transformation program.
Under pressure from investors, the bank in October announced a plan to simplify and transform its business in an effort to return to stable profitability following chronic underperformance in its investment bank and a litany of risk and compliance failures.
Koerner in a statement accompanying results that 2022 was a “crucial year for Credit Suisse” and that it had been “executing at pace” on its strategic plan to create a “simpler, more focused bank.”
“We successfully raised CHF ~4 billion in equity capital, accelerated the delivery of our ambitious cost targets, and are making strong progress on the radical restructuring of our Investment Bank,” he said in the statement.
“We have a clear plan to create a new Credit Suisse and intend to continue to deliver on our three-year strategic transformation by reshaping our portfolio, reallocating capital, right-sizing our cost base, and building on our leading franchises.”
In November, the bank projected a 1.5 billion Swiss franc loss for the fourth quarter amid large-scale restructuring costs, while Credit Suisse shareholders greenlit a $4.2 billion capital raise aimed at financing the overhaul.
The capital raise included the sale of 9.9% of Credit Suisse shares to the Saudi National Bank, making it the bank’s largest shareholder. The Qatar Investment Authority became the second-largest shareholder in Credit Suisse after doubling its stake late last year.
The logo of Swiss bank Credit Suisse is seen at its headquarters in Zurich, Switzerland March 24, 2021.
Arnd Wiegmann | Reuters
Reports of liquidity concerns led Credit Suisse to experience significant outflows of assets under management in late 2022, but Koerner told CNBC at the World Economic Forum in January that the bank had seen a sharp reduction in outflows, and that money was now coming back to some areas of the business.
Despite this, net outflows hit 110.5 billion Swiss francs in the fourth quarter, taking the annual asset outflows for 2022 to 123.2 billion Swiss francs, compared to 30.9 billion inflows for 2021.
The bank’s wealth management division alone saw net asset outflows of 95.7 billion in 2022, concentrated heavily in the fourth quarter.
Credit Suisse revealed that around two thirds of the broader net asset outflows in the quarter occurred in October, and “reduced substantially for the rest of the quarter.”
Koerner told CNBC that 60% of the total outflows came in October. Since then, the bank has embarked on an outreach program, speaking to 10,000 global wealth management clients and 50,000 clients in Switzerland.
“That has created tremendous momentum, and I expect that momentum traveling with us throughout 2023 but you can see it if you look into January,” Koerner told CNBC’s Geoff Cutmore.
“The group is net positive on deposits, wealth management globally net positive on deposits, Asia Pac net positive on deposits, Asia Pac positive on net new assets and also Switzerland positive on net new assets, so I think if you look at that situation which we experienced since January, I would say the situation has changed completely,” Koerner said.
He also expressed confidence that the outreach program and “tremendous” levels of client loyalty would help the bank retain and build on returning inflows.
In its report, the bank said its results were “significantly affected by the challenging macro and geopolitical environment with market uncertainty and client risk aversion.”
“This environment has had an adverse impact on client activity across all our divisions. While we would expect these market conditions to continue in the coming months, we have taken comprehensive measures to further increase our client engagement, regain deposits as well as AuM and improve cost efficiencies,” the bank said.
Other highlights from Thursday’s earnings:
- CET 1 (common equity tier one capital) ratio, a measure of bank solvency, reached 14.1% from 14.4% a year ago.
- Fourth-quarter net revenues stood at 3.06 billion Swiss francs, from 4.58 billion Swiss francs a year earlier.
- Total fourth-quarter operating expenses were 4.33 billion Swiss francs, versus 6.27 billion a year ago.
Credit Suisse’s restructuring plans include the sale of part of the bank’s securitized products group (SPG) to U.S. investment houses PIMCO and Apollo Global Management, as well as a downsizing of its struggling investment bank through a spin-off of the capital markets and advisory unit, which will be rebranded as CS First Boston.
The planned carve-out of the investment bank to form U.S.-headquartered CS First Boston moved ahead in the fourth quarter. Credit Suisse on Thursday announced that it had acquired The Klein Group for $175 million.
The bank also confirmed the appointment of Michael Klein as CEO of banking and the Americas, as well as CEO designate of CS First Boston.
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Qatar doubles Credit Suisse stake as embattled lender forges ahead with strategic overhaul
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The logo of Credit Suisse Group in Davos, Switzerland, on Monday, Jan. 16, 2023.
Bloomberg | Bloomberg | Getty Images
The Qatar Investment Authority is the second-largest shareholder in Credit Suisse after doubling its stake in the embattled Swiss lender late last year, according to a filing with the U.S. Securities and Exchange Commission.
The QIA — Qatar’s sovereign wealth fund — initially began investing in Credit Suisse around the time of the financial crisis. Now, it owns 6.8% of the bank’s shares, according to the filing Friday, second only to the 9.9% stake purchased by the Saudi National Bank last year as part of a $4.2 billion capital raise to fund a massive strategic overhaul.
Combined with the 3.15% owned by Saudi-based family firm Olayan Financing Company, around a fifth of the company’s stock is now owned by Middle Eastern investors, Eikon data indicates.
Credit Suisse will report its fourth-quarter and full-year earnings on Feb. 9, and has already projected a 1.5 billion Swiss franc ($1.6 billion) loss for the fourth quarter as a result of the ongoing restructuring. The shake-up is designed to address persistent underperformance in the investment bank and a series of risk and compliance failures.
CEO Ulrich Koerner told CNBC at the World Economic Forum in Davos last week that the bank is making progress on the transformation and has seen a notable reduction in client outflows.
The injection of investment from the Middle East comes as major U.S. investors Harris Associates and Artisan Partners sell down their shares in Credit Suisse. Harris remains the third-largest shareholder at 5%, but has cut its stake significantly over the past year, while Artisan has sold its position entirely.
‘Final pivot’
Earlier this month, Deutsche Bank resumed its coverage of Credit Suisse with a “hold” rating, noting that the strategy update announced in October and subsequent rights issue in December were the start of the group’s “final pivot towards more stable, higher growth, higher return, higher multiple businesses.”
“While strategically largely the right measures have been announced in our view, the execution of the group’s transformation requires time to lower costs, regain operational momentum as well as reduce complexity funding costs. Hence, we expect subdued profitability, below its potential, even by 2025,” said Benjamin Goy, head of European financials research at Deutsche Bank.
As such, he said that Credit Suisse’s valuation was “not cheap based on earnings anytime soon.”
‘More art than science’
Central to Credit Suisse’s new strategy is the spin-off of its investment bank to form CS First Boston, which will be headed by former Credit Suisse board member Michael Klein.
In a note earlier this month, Barclays Co-Head of European Banks Equity Research Amit Goel characterized Credit Suisse’s earnings estimates as “more art than science,” arguing that details remain limited on the earnings contribution from the businesses being exited.
“For Q422, we will be focused on what is driving the losses (we found it quite hard to get to c.CHF1.1bn of underlying losses in the quarter), whether there are any signs of stabilisation in the business, and if there is more detail on the restructuring,” he added.
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Credit Suisse CEO says outflows have reduced ‘very significantly’ as overhaul progresses
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Switzerland’s second largest bank Credit Suisse is seen here next to a Swiss flag in downtown Geneva.
Fabrice Coffrini | AFP | Getty Images
Credit Suisse is seeing a sharp reduction in client outflows, as the embattled Swiss lender progresses with its major strategic overhaul, new CEO Ulrich Koerner told CNBC on Wednesday.
The bank in November projected a $1.6 billion fourth-quarter loss after announcing a raft of measures to address persistent underperformance in its investment bank and a series of risk and compliance failures. It also revealed at the time that it had continued to experience substantial net asset outflows.
“The outflows, as we said, have reduced very significantly, and we are seeing now money coming back in different parts of the firm,” Koerner said on the sidelines of the World Economic Forum in Davos, Switzerland.
As part of the overhaul, Credit Suisse shareholders in November greenlit a $4.2 billion capital raise, including a new private share offering that will see the Saudi National Bank become the largest interest holder, with a 9.9% stake.
Koerner said the transformation towards a “new Credit Suisse” was going well.
“We laid out a very clear plan, and we talked to all different stakeholder groups in the last three months, as you would expect,” he said.
“I think the plan, the strategy resonates very much. We are in full execution swing, so I think we are making really good progress.”
Credit Suisse has also reached out to tens of thousands of clients in Switzerland and around the world for feedback, Koerner said.
“That has generated very positive momentum, and I think this is momentum that travels with us through 2023,” he added.
‘Zero concerns’ over Klein business acquisition
Koerner confirmed that the reported departure of 10% of Credit Suisse’s investment bankers in Europe was part of its previously announced plans to cut 2,700 jobs by 2023 and reduce headcount by a total 9,000 by 2025.
As part of the overhaul, Credit Suisse will spin off and rebrand its U.S. investment banking division as CS First Boston. The new unit will be headed by former Credit Suisse board member Michael Klein. Credit Suisse is reportedly on the verge of buying Klein’s boutique investment advisory firm.
Koerner insisted that he had “zero concerns” about conflicts of interest, stressing that the bank could deal with the situation “in the utmost professional way.”
“I am really looking forward for Michael to join, because Michael is an excellent banker, he is an excellent dealmaker, and he is very entrepreneurial, and that is why I want to go together with him on a journey.”
U.S. investor Harris Associates has more than halved its stake in Credit Suisse since June 2022. Koerner said he could not judge the firm for its timing, but “we will certainly have discussions.”
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Goldman Sachs is cutting up to 3,200 employees this week as Wall Street girds for tough year
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People enter the Goldman Sachs headquarters building in New York, U.S., on Monday, June 14, 2021.
Michael Nagle | Bloomberg | Getty Images
Goldman Sachs is laying off fewer employees than feared, but the cut is still a deep one.
The global investment bank is letting go of as many as 3,200 employees starting Wednesday, according to a person with knowledge of the firm’s plans.
That amounts to 6.5% of the 49,100 employees Goldman had in October, which is below the 8% reported last month as the upper end of possible cuts.
The final figure, reported earlier by Bloomberg, is a result of internal discussions between business heads and top management over the last month, said the person, who declined to be identified speaking about personnel decisions.
Goldman CEO David Solomon kicked off Wall Street’s layoff season in September and then opted to enact the industry’s deepest cuts so far. Bank employee levels swelled over the last two years in response to a boom in deals and trading activity, but the good times didn’t last: IPO issuance plunged 94% last year because of suddenly inhospitable markets, according to SIFMA data.
Now, with concerns that the economy will slow further this year, Goldman is pulling back on headcount in case stock and bond issuance and mergers don’t rebound. Solomon is also scaling back his ambitions in consumer banking, resulting in part of the layoffs.
Other investment banks are adopting a “wait and see” attitude in the coming weeks. If revenues are tracking below estimate in February and March, the industry could cut more workers, said a person familiar with a leading Wall Street firm’s processes.
Goldman’s move follows smaller cuts from Morgan Stanley, Citigroup and Barclays in recent months. Beleaguered Credit Suisse, which is in the midst of a restructuring, has said it would cut 2,700 employees in the last three months of 2022 and aims to remove a total of 9,000 positions by 2025.
Meanwhile, Goldman is still moving forward with plans to hire junior bankers and in other areas as needed, the source said.
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Saudi crown prince set to invest in Credit Suisse’s new investment bank
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Saudi Arabia’s crown prince and a U.S. private-equity firm run by Barclays PLC’s former chief executive are among investors preparing to invest $1 billion or more into Credit Suisse’s
CSGN,
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new investment bank, people familiar with the matter said.Crown Prince Mohammed bin Salman is considering an investment of around $500 million to back the new unit, CS First Boston, and its CEO-designate, Michael Klein, some of the people said. Additional financial backing could come from U.S. investors including veteran banker Bob Diamond‘s Atlas Merchant Capital, people familiar with that potential investment said. Credit Suisse previously said it had $500 million committed from an additional investor it hasn’t named.
Credit Suisse has received a number of proposals from investors interested in CS First Boston. Credit Suisse Chairman Axel Lehmann at a conference on Thursday said it has other firm commitments in addition to the $500 million from the unnamed investor. The bank hasn’t received a formal proposal from any Saudi entity, some of the people familiar with the matter said.
Credit Suisse is spinning off the New York-based investment bank as part of a fresh start after being buffeted by scandals, regulatory scrutiny and steep losses. It is raising $4.2 billion in new stock that separately will make Saudi National Bank its largest shareholder. It isn’t clear if Prince Mohammed would make the investment through that bank, or another investment vehicle. He is chairman of the country’s sovereign-wealth fund, Public Investment Fund, which along with another government fund is Saudi National Bank’s main owner.
An expanded version of this report appears on WSJ.com.
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Arrival, Coupa Software rise; Apple, Activision fall
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Stocks that traded heavily or had substantial price changes Friday: Arrival, Coupa Software rise; Apple, Activision fall
NEW YORK — Stocks that traded heavily or had substantial price changes Friday:
Arrival SA, up 2 cents to 36 cents.
The electric vehicle maker said that F. Peter Cuneo has been appointed as interim CEO as Denis Sverdlov steps down.
Coupa Software Inc., up $3.76 to $62.69.
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Activision Blizzard Inc., down $3.12 to $73.47.
Microsoft could face antitrust challenges to its proposed buyout of the maker of “Call of Duty” and other video games.
Apple Inc., down $2.96 to $148.11.
The company has been facing labor issues at an iPhone production facility in China.
Southwest Airlines Inc., up 59 cents to $39.22.
Airlines gained ground as the busy holiday travel season gets underway.
Devon Energy Corp., up 55 cents to $68.35.
Energy stocks were mixed as crude oil prices ultimately edged lower.
Nvidia Corp., down $2.49 to $162.70.
Chipmakers edged lower as concerns about weakening demand hover over the sector.
Credit Suisse Group AG, down 24 cents to $3.59.
The investment bank announced terms of a capital increase as it restructures.
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Credit Suisse shareholders greenlight $4.2 billion capital raise
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The logo of Swiss bank Credit Suisse is seen at its headquarters in Zurich, Switzerland March 24, 2021.
Arnd Wiegmann | Reuters
Credit Suisse shareholders on Wednesday approved a 4 billion Swiss franc ($4.2 billion) capital raise aimed at financing the embattled lender’s massive strategic overhaul.
Credit Suisse’s 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.
SNB Chairman Ammar AlKhudairy told CNBC in late October that the stake in Credit Suisse had been acquired at “floor price” and urged the Swiss lender “not to blink” on its radical restructuring plans.
The second capital increase issues newly registered shares with pre-emptive rights to existing shareholders, and passed with 98% of the vote.
Credit Suisse Chairman Axel Lehmann said the vote marked an “important step” in the building of “the new Credit Suisse.”
“This vote confirms confidence in the strategy, as we presented it in October, and we are fully focused on delivering our strategic priorities to lay the foundation for future profitable growth,” Lehmann said.
Credit Suisse on Wednesday projected a 1.5 billion Swiss franc ($1.6 billion) loss for the fourth quarter as it begins its second strategic overhaul in less than a year, aimed at simplifying its business model to focus on its wealth management division and Swiss domestic market.
The restructuring plans include the sale of part of the bank’s securitized products group (SPG) to U.S. investment houses PIMCO and Apollo Global Management, as well as a downsizing of its struggling investment bank through a spin-off of the capital markets and advisory unit, which will be rebranded as CS First Boston.
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.
‘Too big to fail’ but more transparency needed
Vincent Kaufman, CEO of the Ethos Foundation, which represents hundreds of Swiss pension funds that are active shareholders in Credit Suisse, voiced disappointment ahead of Wednesday’s vote that the group was no longer considering a partial IPO of the Swiss domestic bank, which he said would have “sent a stronger message to the market.”
Despite the dilution of shares, Kaufman said the Ethos Foundation would support the issuance of new shares to existing shareholders as part of the capital raise, but opposed the private placement for new investors, primarily the SNB.
“The capital increase without pre-emptive rights in favor of new investors exceed our dilution limits set in our voting guidelines. I discussed with several of our members, and they all agree that the dilution there is too high,” he said.
“We do favor the part of the capital increase with preemptive rights, still believing that the potential partial IPO of the Swiss division would have also been a possibility to raise capital without having to dilute at such a level existing shareholders, so we are not favoring this first part of the capital increase without pre-emptive rights.”
At Credit Suisse’s annual general meeting in April, the Ethos Foundation tabled a shareholder resolution on climate strategy, and Kaufman said he was concerned about the direction this would take under the bank’s new major shareholders.
“Credit Suisse remains one of the largest lenders to the fossil fuel industry, we want the bank to reduce its exposure, so I’m not sure this new shareholder will favor such a strategy. I’m a little bit afraid that our message for a more sustainable bank will be diluted among these new shareholders,” he said.
Wednesday’s meeting was not broadcast, and Kaufman lambasted the Credit Suisse board for proposing a capital raise and entering in new external investors “without considering existing shareholders” or inviting them to the meeting.
He also raised questions about “conflict of interest” among board members, with board member Blythe Masters also serving as a consultant to Apollo Global Management, which is buying a portion of Credit Suisse’s SPG, and board member Michael Klein slated to head up the new dealmaking and advisory unit, CS First Boston. Klein will step down from the board to launch the new business.
“If you want to restore trust, you need to do it clean and that’s why we’re still not convinced. Again, a stronger message with an IPO of the Swiss domestic bank would have reassured at least the pension funds that we are advising,” he said.
However, Kaufman stressed that he was not concerned about Credit Suisse’s long-term viability, categorizing it as “too big to fail” and highlighting the bank’s strong capital buffers and shrinking outflows.
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Credit Suisse shares tumble after flagging $1.6 billion 4Q loss amid strain for wealth management comes
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Credit Suisse Group AG shares tumbled in Wednesday morning trading after the bank said asset outflows at its wealth-management business would lead to a fifth consecutive quarterly loss.
Shares
CS,
-1.45% CSGN,
-4.64%
at 0830 GMT were down 4.9% to CHF3.66.The Swiss lender said it expects to post a loss before taxes of around 1.5 billion Swiss francs ($1.58 billion) in the fourth quarter, after lower deposits and assets under management led to reduced commissions and fees.
The bank, Switzerland’s second-largest by assets, said that it net-asset outflows in the quarter to Nov. 11 were around 6%, or $88.3 billion of its total $1.47 trillion assets under management.
At the bank’s wealth-management arm, its key business serving the world’s rich, customers removed $66.7 billion.
It came after the Zurich-based company experienced deposit and net-asset outflows in the first two weeks of October, it said, after social-media reports and a spike in credit-default swaps caused a frenzy over the bank’s financial position.
The bank said the outflows led its liquidity to fall below some local-level legal requirements, but it maintained its required group-level liquidity and funding ratios at all times.
Write to Ed Frankl at edward.frankl@dowjones.com
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Credit Suisse projects $1.6 billion fourth-quarter loss as it embarks on strategy overhaul
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Switzerland’s second largest bank Credit Suisse is seen here next to a Swiss flag in downtown Geneva.
Fabrice Coffrini | AFP | Getty Images
Credit Suisse on Wednesday projected a 1.5 billion Swiss franc ($1.6 billion) fourth-quarter loss as it undertakes a massive strategic overhaul.
The embattled lender last month announced a raft of measures to address persistent underperformance in its investment bank and a series of risk and compliance failures that have saddled it with consistently high litigation costs.
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“These decisive measures are expected to result in a radical restructuring of the Investment Bank, an accelerated cost transformation, and strengthened and reallocated capital, each of which are progressing at pace,” the bank said in a market update on Wednesday.
Credit Suisse revealed that it had continued to experience net asset outflows, and said these flows were approximately 6% of assets under management at the end of the third quarter. The Zurich-based bank flagged last month that this trend continued in the first two weeks of October, after reports cast doubt over its liquidity position and credit default swaps spiked. Credit default swaps are a type of financial derivative that provide the buyer with protection against default.
“In wealth management, these outflows have reduced substantially from the elevated levels of the first two weeks of October 2022 although have not yet reversed,” Credit Suisse said Wednesday.
The group expects to record a 75 million Swiss franc loss related to the sale of its shareholding in British wealth tech platform Allfunds group, while lower deposits and reduced assets under management are expected to lead to a fall in net interest income, recurring commissions and fees, which the bank said is likely to lead to a loss for its wealth management division in the fourth quarter.
“Together with the adverse revenue impact from the previously disclosed exit from the non-core businesses and exposures, and as previously announced on October 27, 2022, Credit Suisse would expect the Investment Bank and the Group to report a substantial loss before taxes in the fourth quarter 2022, of up to CHF ~1.5 billion for the Group,” the bank said.
“The Group’s actual results will depend on a number of factors including the Investment Bank’s performance for the remainder of the quarter, the continued exit of non-core positions, any goodwill impairments, and the outcome of certain other actions, including potential real estate sales.”
Credit Suisse confirmed that it has begun working toward the targeted 15%, or 2.5 billion Swiss francs, reduction of its cost base by 2025 with a targeted reduction of 1.2 billion Swiss francs in 2023. Layoffs of 5% of the bank’s workforce are underway alongside reductions to “other non-compensation related costs.”
The bank announced last week that it would accelerate the restructure of its investment bank by selling a significant portion of its securitized products group (SPG) to Apollo Global Management, reducing SPG assets from $75 billion to approximately $20 billion by the middle of 2023.
“These actions and other deleveraging measures including, but not limited to, in the non-core businesses, are expected to strengthen liquidity ratios and reduce the funding requirements of the Group,” it said Wednesday.
Credit Suisse holds an extraordinary general meeting on Wednesday, at which shareholders will vote on the group’s restructuring plans and capital raising proposals.
Credit Suisse shares fell more than 5% in early trade.
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Credit Suisse sells most of its securitized products business to Apollo as it speeds up restructure
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Credit Suisse on Tuesday announced that it would accelerate the restructure of its investment bank by selling a significant portion of its securitized products group (SPG) to Apollo Global Management.
Credit Suisse said the transaction, along with the potential sale of other assets to third-party investors, is expected to reduce SPG assets from around $75 billion to $20 billion.
The bank said the move represented an “important step towards a managed exit from the Securitized Products business, which is expected to significantly de-risk the investment bank and release capital to invest in Credit Suisse’s core business.”
Credit Suisse announced a massive strategic overhaul at the end of October alongside a huge quarterly loss, after battling sluggish investment banking revenues and litigation costs relating to a slew of legacy compliance and risk management failures.
Central to the restructure plan was an offload of risk-weighted assets (RWAs), with around $10 billion of these accounted for by Tuesday’s transactions, the bank said.
“The approximately USD 20 billion of remaining assets, which will generate income to support the exit from the SPG business, will be managed by Apollo under an investment management relationship with an expected term of five years to be entered into at the first closing,” Credit Suisse added in a statement.
“Under the terms of the transactions contemplated with Apollo, Credit Suisse’s CET1 capital ratio is expected to be strengthened by the release of RWAs and the recognition, upon closing, of the premium paid by Apollo, whereby the final amount will depend on discount rates and other transaction-related factors.”
The SPG is a substantial player in the public U.S. securitization market, particularly in the area of residential mortgage-backed securities.
Credit Suisse will hold an extraordinary general meeting next week to seek the green light from shareholders on several key elements of the restructure. These include the planned 1.5 billion Swiss franc ($1.6 billion) investment from the Saudi National Bank in exchange for a 9.9% shareholding, part of a 4 billion Swiss franc capital raise.
This is a developing news story and will be updated shortly.
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What Cramer is watching Thursday — cooler inflation, FTX crypto fallout, TJX upgrade
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U.S. stock futures shot up more than 800 points and the 10-year Treasury yield sank below 4% after CPI release.
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Credit Suisse makes $2.98 billion debt-repurchase offers
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Credit Suisse Group AG said Friday that it is offering to repurchase debt securities for a total of close to $3 billion as the troubled lender looks to manage its liabilities ahead of a touted restructuring.
The Swiss bank
CS,
+1.66% CSGN,
+3.13%
is offering to buy back eight euro- or pound sterling-denominated senior debt securities for a total of up to 1 billion euros ($979.2 million,) it said.It is also offering to buy back 12 U.S. dollar-denominated securities for up to $2 billion. Both offers are subject to various conditions and will expire on Nov. 3 and Nov. 10, respectively, Credit Suisse said.
The value of some Credit Suisse bonds fell at the beginning of this week alongside shares in the lender amid speculation over its financial health. The bank has moved to reassure investors ahead of a planned strategy update due on Oct. 27 alongside quarterly results.
Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby
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