Credit Suisse Stuns Investors With 50% Bigger-Than-Expected Capital Raise

Hot on the heels of Deutsche Bank's admission that all is not well, Credit Suisse's announcement last night of a major capital raise was greeted by buying pressure from investors. However, reality punched them in the face this morning as CS releasaed its investor day details and, as Bloomberg reports, is looking to raise up to CHF8 billion (almost 50% larger than Goldman Sachs investor survey suggested). Clearly, CS' has a much more massive capital shortfall than expected.

As Bloomberg reports,

Credit Suisse Group AG Chief Executive Officer Tidjane Thiam is considering selling stock in an offering that may raise 6 billion francs ($6.2 billion) to 8 billion francs, people with knowledge of the discussions said.

 

The bank plans to proceed with the sale after presenting a new strategy to investors later this month, said one person, who asked not to be identified because the matter is private. The company hasn’t made a final decision on the amount, the people said.

 

Thiam, 53, who took over from Brady Dougan in July, will present a strategy update on Oct. 21. He is under pressure to raise capital as Swiss regulators are looking to toughen requirements designed to shield the system from future financial crises. Thiam has said he plans to allocate more resources to wealth management and strengthen the bank’s position in Asia, while scaling back the investment bank, mirroring an approach of UBS Group AG.

 

Investors surveyed by Goldman Sachs Group Inc. on average estimated the bank will raise about 5.4 billion francs, according to a note from Oct. 1. Tougher capital requirements, litigation costs and the future direction of the company will all help determine the extent of any capital increase, UBS analysts Daniele Brupbacher and Mate Nemes said in a note on Friday.

 

Credit Suisse rose 2.2 percent to 24.10 francs at 5:16 p.m. in Zurich. The shares dropped 3.6 percent on Thursday after the Financial Times reported that the lender is preparing a “substantial” share sale.

 

“We are conducting a thorough assessment of Credit Suisse’s strategy, evaluating all options for the group, its businesses and its capital usage and requirements,” the bank said in a statement late Thursday. Tobias Plangg, a Zurich-based spokesman for Credit Suisse, declined to comment beyond the statement.

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The reaction was a plunge and limit down halt before algos lifted it back to unch...

 

As we noted previously, the official narrative is well-known: the bank does not need the funds, it is simply a precaution ahead of new, more stringent capital requirements:

 
 

The capital is likely to be used to absorb losses triggered by a faster restructuring of the Swiss group, the people said. But Credit Suisse will also need higher capital ratios to comply with toughening demands from regulators.

 

The Swiss authorities are expected to announce an increase of minimum capital ratios over the coming months, which could prove more challenging for the bank than its better capitalised local rival, UBS. Credit Suisse’s common equity tier one capital ratio of 10.3 per cent compares with UBS’s 13.5 per cent

The real reason, of course, has nothing to do with this, and everything to do with the collapse of manipulation cartels involving Liebor, FX, commodities, bonds, equities, gold, and so on, because when banks can no longer collude with each other to push markets in any given direction, that's when they start losing money. That and, of course, the fact that central bank intervention in capital markets has made it virtually impossible to trade any more. Or as they call it, "miss capital ratios."

Expect many more such announcements in the coming weeks.