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Credit Suisse is preparing to sell part of its Swiss domestic bank as it tries to close a capital hole of around SFr4.5bn, people briefed on the discussions said.
With less than two weeks until the lender presents radical strategic restructuring plans, executives are in the final stages of plans to make drastic job cuts, which could affect up to 6,000 of the group’s 50,000 global workforce.
Ulrich Koerner was installed as CEO of Credit Suisse over the summer. Inflation hits record low.
Although much of the focus so far has been on the outflows from the Swiss lender’s investment bank – where executives are confident of selling all or part of the profitable products business – the board has turned to raising cash by selling non-core domestic units. Trade, known as the Swiss Universal Bank.
While its core domestic operation, which provides a range of corporate, personal and retail banking services in Switzerland, will remain intact, the company is in talks to sell several subsidiaries and stakes in other businesses.
The units considered for sale include: a stake in Six Group, which operates the Zurich stock exchange; an 8.6 percent stake in Allfunds, a listed Spanish investment company; two specialist Swiss banks, Pfandbriefbank and Bank-Now; and Swisscard, a joint venture with American Express.
Credit Suisse has a stake in Allfunds since 2019 and a business listed last year with a market capitalization of €7.2bn. The shares have halved since then, meaning Credit Suisse’s 8.6 per cent stake is worth around SFr374mn.
The bank is trying to sell a historic property, the two-century Savoy, Zurich’s oldest grand hotel, opposite the bank’s headquarters on Paradeplatz.
The luxury hotel, which is undergoing renovations and is due to open in 2024, could cost SFr500mn, people at the bank said.
The board rejected divestments from Credit Suisse’s asset management and private banking businesses, according to people familiar with the plan, although it will continue to exit smaller, less profitable markets. Credit Suisse this year has lagged its wealth management operations in Mexico and sub-Saharan Africa.
Analysts have disputed the size of the capital hole caused by the changes the bank is pushing, with Goldman Sachs this week putting the figure at SFr8bn.
But the bank’s board is confident it will be between SFr4bn and SFr4.5bn after factoring in restructuring and legal costs, according to people familiar with the plans.
The bank’s board and executive team have been evaluating each business unit against three key criteria: profitability, capital requirements and relevance to the wealth management business.
The New York-based secured products business has been assessed as requiring the most capital and has little overlap with the wealth business, which will become the bank’s main focus after the strategic review. The profitability of the unit made it easy to sell.
People involved in the discussions in the room said they were confident of agreeing to the sale by October 27 and were considering bids from several suitors.
Previously reported by Bloomberg and The Wall Street Journal, US investors Apollo Global Management, Pimco, Sixth Street Partners and Centerbridge Partners, as well as Japanese bank Mizuho Financial Group, confirmed interest.
JPMorgan analyst Kian Abuhossein upgraded his rating on Credit Suisse from overweight to neutral last week, saying he expects the guaranteed products business to sell off.
The unit is forecast to generate SFr1.2bn in revenue by 2024, meaning pre-tax profits of SFr400mn will account for the lion’s share of the investment bank’s overall SFr700mn profit.
Credit Suisse declined to comment, saying it would provide full details of its strategic plan on Oct. 27.
Additional reporting by Laura Noonan.
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