The investment banking unit dragged Credit Suisse to a fourth consecutive quarterly loss. The bank intends to raise around 4 billion Swiss francs in capital and «radically restructure» its investment bank. 

Credit Suisse intends to raise around 4 billion Swiss francs in capital by issuing new shares to investors, subject to approval at a forthcoming Extraordinary General Meeting on November 23, it said in a statement Thursday. 

Saudi National Bank has already committed to invest up to 1.5 billion francs to achieve a shareholding of up to 9.9 percent. This would make the Saudis the bank’s second-largest shareholders after the American financial investor Harris Associates.

Restructuring Cost

The raise will help finance the restructuring, which the bank estimates at 2.9 billion francs over a period from the fourth quarter to 2024. Around 250 million francs of that amount would incur in the last three months of this year, it said. 

Together with the adverse revenue impact from exiting its non-core businesses and exposures, it expects a group net loss in the fourth quarter.

Although Credit Suisse reported a fourth consecutive quarterly loss, the pre-tax third-quarter loss of 342 million Swiss francs was less than expected. The investment bank lost 640 million in the quarter. The loss attributable to shareholders was an eye-popping 4.03 billion francs in the third quarter coming on the heels of a 1.6 billion second-quarter loss. 

Wealth Management

The bank said it intends to allocate nearly 80 percent of capital to wealth management, the Swiss Bank, as well as to its asset management and markets business by 2025. 

Credit Suisse saw a net outflow of assets for the third quarter of 12.9 billion after a 7.7 billion outflow the previous quarter. Overall assets under management fell to 1.401 trillion from 1.454 trillion in the second quarter.

Return of First Boston

Credit Suisse said it will «radically restructure» its investment bank by reducing its risk-weighted assets and leverage exposure in the unit by 40 percent. It will revive the CS First Boston brand, to focus on advisory and capital markets. Once launched CS First Boston be led by Michael Klein, pending regulatory approvals.

Meanwhile, David Miller will continue in his current role as global head of investment banking and capital markets, reporting to Koerner and supporting the establishment of CS First Boston.

As part of the investment bank's downsizing, Credit Suisse will transfer a significant portion of the securitized products group (SPG) to an investor group led by Apollo Global Management in the US. 

Job Cuts

The bank is cutting 2,700 full-time positions by the end of the year. By 2025 it will reduce the total number of jobs from 52,000 to 43,000. 

Non-Core Unit

In addition, it is also creating a non-core unit (NCU) to accelerate the run-down of non-strategic, low-return businesses and markets, to release capital. Louise Kitchen from Deutsche Bank will head the NCU, effective November 1.

Following its disastrous second-quarter results, when it posted a 1.6 billion Swiss franc loss ($1.62 billion), Credit Suisse installed Ulrich Koerner as CEO to replace Thomas Gottstein on July 27, concurrently announcing the strategic review of its operations. And here we are.

Three major rating agencies downgraded Credit Suisse after the second-quarter loss, as finews.com reported. In fact, on Koerner's first day on the job, Moody's was the third of the institutions to do so. 

As of the close yesterday, the Credit Suisse share price was 4.76 Swiss francs. Shortly before 11:00 am central European time, the stock was trading at 4.001 francs, down nearly 16 percent from the previous days close