The Swiss bank patched up its capital with a $1.9 billion cash call, after swinging to a quarterly loss on the wreckage of Archegos.
Reeling from the fallout of prime brokerage client Archegos, Zurich-based Credit Suisse is shoring up capital with a net infusion of 1.7 billion Swiss francs ($1.85 billion),mainly from existing investors and super-wealthy individuals. The Swiss lender disclosed the injection alongside a net loss of 252 million francs in the first quarter, from a 1.31 billion franc profit year-ago.
Backstopped by its core base of long-standing supporters, the cash shore-up will be extended more widely to Credit Suisse investors as well. It is the latest in an annus horribilis: the double hit of the U.S. hedge fund, which wrought 4.4 billion francs in losses, as well as a fund tie-up with Greensill is roiling the bank.
Slew Of Departures
Two weeks ago, it reneged on most of its dividend for last year over the Archegos lapses, and halted a 1.5 billion franc share buyback. Risk chief Lara Warner and top investment banker Brian Chin resigned. On Thursday, Credit Suisse's regulator confirmed it has begun another two enforcement proceedings against the Swiss bank.
Roughly a dozen executives have already been temporarily replaced, are leaving, or have left as a result of the twin disasters, amid two separate board-led investigations. Credit Suisse has promised an «no-holds-barred» evaluation of its strategy under António Horta-Osório, who is due to be elected chairman next Friday.
«Unacceptable» Loss
The bank's loss before taxes of 757 million francs before taxes was milder than the 900 million franc loss it flagged earlier this month. «The loss we report this quarter, because of this matter, is unacceptable,» CEO Thomas Gottstein said.
Shareholders agreed with him, sending the stock more than six percent lower by Thursday midday. Credit Suisse stock hit a historic low of 7.63 francs per share two weeks ago, after detailing the Archegos hit. The bank said it would look to «restore» a dividend to shareholders this year, reliant on its financial results.
More Pain Ahead
Credit Suisse said it had managed to offload 97.5 percent of its exposure to Archegos, which ran as high as $20 billion at one point, «The Wall Street Journal» (behind paywall) reported overnight. The bank said it will book another $600 million in losses from the hedge fund against the second quarter.
Archegos aside, Switzerland's second-largest lender after UBS had a blow-out quarter, especially domestically, in Asia, and at its investment bank. Finance chief David Mathers also benefited from a first-quarter release of previous loan loss reserves, much milder provisions against future legal action, and a gain on its holding in the Allfunds platform slated for a public listing.
The bank didn't stow anything against Greensill, the insolvent supply chain financier with which Credit Suisse teamed up on a $10.billion line of funds. It has yet to detail how much damage it expects from the fund collapse. On Thursday, the Swiss bank said it has collected just over half the fund volume – $5.4 billion – as cash to return to investors.
«One-Bank» Emblem
It didn't comment on the keenly-awaited decision of whether it would reimburse its wealthy clientele, which made for the bulk of the funds' investors and who are now nursing losses. It said it kissed off $30 million from an $160 million bridge loan granted to Greensill in the U.K. last autumn, ahead of the finance boutique’s planned 2021 public stock-listing.
Though puny compared to the Archegos wreckage or the probable fund losses, the Greensill loan is emblematic for the conflicts of interests inherent in Credit Suisse's «one-bank» policy of seeking investment banking, asset management, and private banking business with its clients.
More to follow
