The Swiss bank will raise around $4 billion in new capital to retreat from Wall Street trading and recover from a deep crisis
Credit Suisse Group revealed a transformation plan, resulting in a radical restructuring, an accelerated cost transformation, and reallocated capital. The bank plans to cut thousands of jobs and raise around $4 billion in fresh capital, attempting to become more focused on the wealth management segment.
The new strategy is a solution to the company’s current crisis with the fourth consecutive quarterly hefty loss and declining market confidence.
Previously, Credit Suisse shares declined 19% due to the market fears that the bank’s shares would be further diluted through another capital raise. However, the capital raise seems unavoidable, as major restructuring would be costly.
The bank expects to become leaner and sharpen the focus of its markets trading businesses. Credit Suisse will also rebrand its capital markets and advisory business as an independent unit called CS First Boston.
As a result of restructuring, around 9,000 of the bank’s employees will lose their jobs in three years. The first wave of job cuts involves 2,700 people.
Top management changes are also expected. Thus, Michael Klein, a veteran banker and board member will step down to become the new unit’s chief executive. Nita Patel was appointed as Chief Compliance Officer, joining the Executive Board, effective November 1.
The bank confirmed it will sell its securitized products group to a consortium made up of Apollo Global Management and Pacific Investment Management Co. This way, Credit Suisse hopes to channel more of its assets into wealth management, which will continue to be its main business. The bank predicts its cost base should fall by around $2.5 billion from current levels to around $14.7 billion by 2025.
The total estimated cost of the restructuring is around $2.9 billion spread over the next two years.