NEW YORK: Credit Suisse Group AG faces a capital shortfall of as much as eight billion Swiss francs (US$8bil or RM37bil) in 2024, according to Goldman Sachs Group Inc, a further illustration of the troubles facing the Swiss lender.
Analysts led by Chris Hallam estimate a hole of at least four billion Swiss francs (RM19bil) and say an equity raise would be “prudent,” given the need to restructure the investment banking operations at a time of “minimal” capital generation.
“Credit Suisse continues to face cyclical and structural challenges,” the analysts wrote in a note, maintaining a “sell” recommendation on the stock.
Speculation about the Swiss lender’s health – capital levels and liquidity – has rocked its shares this year, leading to calls from some analysts for an equity raise.
Chief executive officer Ulrich Koerner is due to detail the bank’s second strategy overhaul in a year on Oct 27, widely seen as a critical opportunity to restore faith in the lender after more than a year of losses and management missteps.
Goldman’s comments were echoed by Jefferies analyst Flora Bocahut, who said in a note yesterday that Credit Suisse needs to build about nine billion Swiss francs (RM42bil) of capital in the next two to three years.
Given the dilutive nature of a capital increase, Bocahut expects Credit Suisse to prioritise asset disposals, she wrote in a note.
Bloomberg News reported last Friday that bidders are lining up for the bank’s securitised products unit, a key pillar in the downsizing of its investment banking operations.
Credit Suisse is the last of 16 banks to face a US class-action lawsuit accusing it of conspiring with others to rig the foreign exchange market.
Jury selection started yesterday in a case by a class of investors including pension funds that claims the bank used online chatrooms from late 2007 through 2013 to fix the spreads for currency pairs.
The suit alleges this was done with traders from other international banking giants, including Citigroup Inc, UBS Group AG, Barclays Plc, JPMorgan Chase & Co, HSBC Holdings Plc and Deutsche Bank AG.
The trial comes at a tumultuous time for the Swiss lender, which is working to reassure investors about its capital strength and liquidity ahead of its second restructuring in as many years.
The reorganisation potentially involves deep cuts to the investment bank, which has racked up huge losses and played a front-line role in some of Credit Suisse’s biggest scandals.
“We continue to believe that Credit Suisse has strong legal and factual defences, and we look forward to establishing those at trial,” the bank said in a statement Monday.
“It is important to note that this trial will not result in any monetary damages.”
The bank at one point faced potential liability of US$19bil (RM89bil), based off the tripling of damages that is standard in antitrust cases, according to Bloomberg Intelligence.
But pre-trial rulings recast the case so that jurors will instead decide only whether Credit Suisse participated in a conspiracy to fix prices. If the bank loses, customers can pursue damages individually instead of as a group.
Credit Suisse could eventually be on the hook for financial damage caused by the alleged conspiracy, to the extent it’s above the total of the other settlements.
And a jury verdict against Credit Suisse would likely limit its defences in a separate case filed by almost 1,300 investment firms and government entities that opted out of the class action. — Bloomberg
Source: thestar.com.my
