BANK CRISIS
Credit Suisse Weighs US Asset-Management Sale, Investment Bank Chief to Exit
(Bloomberg) -- Credit Suisse Group AG is exploring a sale of its US asset-management operations and moving closer to securing financing for other businesses, as it nears a strategy revamp that’s likely to fundamentally reshape it.
The Swiss bank has recently begun a sales process for the US operations of Credit Suisse Asset Management, or CSAM, according to people familiar with the matter. No final decision has been made and Credit Suisse could opt to hold onto the unit, the people said, asking for anonymity to discuss internal considerations.
Abu Dhabi and Saudi Arabia, meanwhile, are separately weighing whether to put money into Credit Suisse’s investment bank and other businesses to take advantage of depressed values, other people said. Deliberations are at an early stage and it isn’t clear if they’ll lead to firm offers.
With little more than a week remaining, Credit Suisse is racing to line-up financing for a restructuring that will likely see steep job cuts and a significant reshaping of the business. The investment bank is at the center of the plans and could even be broken up. While Credit Suisse made preparations to tap shareholders if needed, it would prefer to raise money through asset sales and by winning outside investors to fund businesses that it wants to spin out.
Shares of the lender rose for a second day, gaining 1.3% at 9:27 a.m. in Zurich trading. They’ve lost about half of their value this year and recently hit a new low.
“We have said we will update on progress on our comprehensive strategy review when we announce our third-quarter earnings,” Credit Suisse said in a statement. “It would be premature to comment on any potential outcomes before then.”
A sale of the US asset management operations, which include a platform for investing in collateralized loan obligations, could draw interest from private equity firms or other asset managers, the people familiar with the process said. The bank has said that the Americas account for 146 billion Swiss francs ($147 billion) of its assets under management.
The unit is one of two large businesses that the bank is looking to sell. Credit Suisse is also in the process of finding investors for or divesting its securitized products group, which has drawn interest from parties including Mizuho Financial Group Inc. and Apollo Global Management Inc., Bloomberg News has reported.
The bank is also seeking to bring in an outside investor to inject money into a potential spinoff of its advisory and investment banking businesses. A separation of the dealmaking and underwriting unit would effectively break the troubled investment banking division into three pieces.
Abu Dhabi and Saudi Arabia are exploring investments through sovereign wealth funds such as Abu Dhabi’s Mubadala Investment Co. and Saudi Arabia’s Public Investment Fund, people familiar with the matter said. A deal could also come through other vehicles in which each country owns significant stakes, the people said. But the potential investors are wary about the risk of future losses or legal issues, they said.
Abu Dhabi’s media office and the PIF in Saudi Arabia didn’t immediately have representatives available to comment. Mubadala declined to comment.
Credit Suisse has long counted on wealthy Middle Eastern investors as top shareholders, including the Qatar Investment Authority and Saudi Arabia’s Olayan Group. They’ve often invested in times of need, including the QIA’s participation in Credit Suisse’s approximately $2 billion convertible notes issuance in April 2021. That helped shore up the balance sheet after Archegos.
Separately, Credit Suisse has gauged the QIA’s interest in investing via a capital injection or stake purchase in one of the units, according to people familiar with the matter. A representative for QIA declined to comment.
As part of the planned changes, investment bank head Christian Meissner is set to depart the lender, Bloomberg reported. The banker, who has been focusing on the overhaul of the business, is looking at options including starting his own advisory firm or joining another institution next year.
An Austrian citizen, he was initially hired by Credit Suisse in October 2020 to co-run a newly created group connecting clients of the wealth management unit with investment-banking services. He became Credit Suisse’s investment-bank chief in 2021 in the wake of the $5 billion hit from the collapse of Archegos Capital Management.
John Revill and Oliver Hirt
Mon, October 17, 2022
A clock is seen near the logo of Swiss bank Credit Suisse in Zurich
ZURICH (Reuters) - Credit Suisse Group AG has approached at least one Middle Eastern sovereign wealth fund for a capital injection, a source said, while some funds are looking at the scandal-hit Swiss bank's businesses as potential investment opportunities.
Abu Dhabi and Saudi Arabia were weighing up, through their sovereign wealth funds, whether to put money into Credit Suisse's investment bank and other businesses, Bloomberg reported. An investment would be to take advantage of low valuations, it said.
Credit Suisse's investment banking chief, Christian Meissner, will be leaving the bank once it has announced a strategic overhaul on Oct. 27, a source familiar with the situation said.
The size and other details of a potential capital injection could not be learned.
A spokesperson for Credit Suisse declined to comment, reiterating that it will update on its strategy review when it announces third-quarter earnings.
The largest Middle Eastern sovereign fund investor in Credit Suisse, the Qatar Investment Authority, declined to comment. Mubadala declined to comment. ADIA and PIF did not immediately respond to requests for comment.
Credit Suisse's U.S.-listed depository receipts closed 3.6% higher on Monday. (Graphic: Cost of insuring Credit Suisse debt, https://graphics.reuters.com/CREDITSUISSE-CDS/dwpkroxdxvm/chart.png)
Credit Suisse, one of the largest banks in Europe, is trying to recover from a string of scandals, including losing more than $5 billion from the collapse of investment firm Archegos last year, when it also had to suspend client funds linked to failed financier Greensill.
Analysts have said the company might need as much as 9 billion Swiss francs ($9 billion) as part of a reorganization, some of which may have to come from investors and some from the sale of assets.
It has already begun a sale process for its U.S. asset management arm, with initial bids due at the end of this week, a source familiar with the matter said. Bloomberg News, which first reported the news on Monday, said the unit is expected to draw interest from private equity firms.
Its approach for a capital raise indicates that the sale of assets alone may not be enough to cover the costs of an imminent overhaul that the embattled bank hopes will draw a line under heavy losses and a string of scandals.
On Monday, the Swiss lender agreed to pay $495 million to settle legal action over mortgage-linked investments in the United States, adding to the billions it has been paying out to resolve legal cases linked to its residential mortgage-backed securities (RMBS) business in the run up to the 2008 financial crisis.
The New Jersey case was the largest of its remaining exposure on its legacy RMBS business, Credit Suisse said, with five remaining cases, all far smaller, still in litigation.
In June, Credit Suisse was convicted of failing to prevent money laundering by a Bulgarian cocaine trafficking gang, while a Bermuda court ruled that a former Georgian prime minister and his family were due damages of more than half a billion dollars from Credit Suisse's local life insurance arm.
Credit Suisse's chairman, Axel Lehmann, pledged on Friday to reform the bank after a "horrible" 2021 in which it lost billions of dollars, the biggest ever loss in its history.
"We are fully aware that we need to change and we will change, clearly," he said.
Lehmann took over in January at the Swiss bank.
(Reporting By Paritosh Bansal in New York, Elisa Martinuzzi in London, John Revill, Oliver Hirt and Noele Illien in Zurich, and David French in New York; additional reporting by Yousef Saba in Dubai; editing by John O'Donnell, David Evans and Stephen Coates)
Credit Suisse pays $495 million to settle legacy U.S. case
John Revill
Mon, October 17, 2022
ZURICH (Reuters) -Credit Suisse has agreed to pay $495 million to settle a case related to mortgage-linked investments in the United States, the latest pay-out related to past blunders that have battered the Swiss bank's reputation.
The lender has been paying out billions of dollars to resolve legal cases linked to its residential mortgage-backed securities (RMBS) business in the run up to the 2008 financial crisis.
The decline in mortgage payments reduced the value of the assets, leading to huge losses for investors.
Switzerland's second biggest bank is trying to move on from these legacy issues which have dogged its performance and cost it billions of dollars.
The bank is also trying to recover from other missteps, including losing more than $5 billion from the collapse of investment firm Archegos last year, when it also had to suspend client funds linked to defunct financier Greensill Capital.
The latest RMBS case, brought by the New Jersey Attorney General, alleged Credit Suisse had "misled investors and engaged in fraud or deceit in connection with the offer and sale of RMBS."
The attorney general's office had claimed more than $3 billion in damages in a case filed in 2013.
"Credit Suisse is pleased to have reached an agreement that allows the bank to resolve the only remaining RMBS matter involving claims by a regulator," the bank said in a statement.
"The settlement, for which Credit Suisse is fully provisioned, marks another important step in the bank’s efforts to pro-actively resolve litigation and legacy issues."
The New Jersey case was the largest of its remaining exposure on its legacy RMBS business, Credit Suisse said, with five remaining cases at various stages of litigation.
These are expected to be resolved in the next six months, a person familiar with the matter told Reuters. The total cost likely to be much less than $100 million, the source added.
RMBS are a debt-based securities, seen as similar to bonds, which are backed by the interest paid on home loans packaged together to sell to investors.
But poorly constructed RMBS's contributed to the financial crisis in 2008 - when wider groups of mortgages defaulted leading to big losses.
Credit Suisse, whose share price has more than halved in the last 12 months, has already paid out huge sums to resolve claims related to the products, including a $5.3 billion deal with the Department of Justice in 2017.
It said at that time products it sold did not meet underwriting guidelines.
It also paid $600 million to MBIA Inc last year after the New York based-municipal bond insurer paid out hundreds of millions to compensate investors.
The bank, one of the largest in Europe and one of Switzerland's global systemically important banks, is scheduled to release details of a much anticipated strategic review alongside third-quarter results on Oct. 27.
In June, the bank was convicted of failing to prevent money laundering by a Bulgarian cocaine trafficking gang, while a Bermuda court ruled that a former Georgian Prime Minister and his family were due damages of more than half a billion dollars from Credit Suisse's local life insurance arm.
The U.S. Justice Department is also investigating whether Credit Suisse continued helping U.S. clients hide assets from authorities, eight years after the Swiss bank paid a $2.6-billion tax evasion settlement.
(Reporting by John Revill and Oliver Hirt; Editing by Kirsten Donovan, Mark Potter and Jane Merriman)
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