Credit Suisse Announces “Radical” Restructuring

Credit Suisse Announces “Radical” Restructuring

The scandal-plagued Swiss bank Credit Suisse announced on Thursday that it would raise $4 billion to withdraw from Wall Street and focus more on handling the accounts of the world’s wealthy.

The corporation presented a “radical” turnaround strategy, which promised to make it “a stronger, more resilient, and more efficient bank” afterwards. By the end of 2025, 9,000 full-time jobs would have been eliminated due to the endeavour, with another 2,700 positions to be lost soon. CEO Ulrich Körner said, “This is a momentous occasion for Credit Suisse.”

According to the lender, the Saudi National Bank has already committed up to $1.5 billion, giving the lender a slightly under 10% stake. The revelation that the bank had lost over $4 billion in the third quarter and the announcement did not reassure investors. Credit Suisse stock fell 15% during the morning trade in Zurich.

The bank attributed its financial performance to the execution of its restructuring plan and the general market volatility and economic uncertainty that have caused clients to seek safety from risk.

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According to chairman Axel Lehmann, Credit Suisse now has a “blueprint for success.” A significant portion of its riskier assets will be sold off as part of a major revamp of its investment bank. CS First Boston will be spun off as a separate entity to house its capital markets and consulting operations.

Credit Suisse will also transfer “a major chunk” of its securitized-products department to a group of investors led by Apollo Global Management, the private equity company, as part of its plan to reduce its investment bank. The division deals in securities backed by loans and mortgages.

In addition, Credit Suisse wants to cut costs by billions of euros. The iconic Savoy Hotel in Zurich is up for sale, and the bank just sold its stock in fintech firm Allfunds. The lender wants to start a fresh chapter following a challenging period that hurt its brand and profitability.

The bankruptcy of the American hedge fund Archegos Capital last year, which cost Credit Suisse $5.5 billion, was one prominent error. An impartial, external investigation later discovered a failure to manage risk appropriately.

Social media rumours that the bank was about to fail earlier this month sent shares on a wild journey. According to analysts, Credit Suisse had more than enough capital and liquidity to meet regulatory obligations and respond to a potential shock. However, Credit Suisse stated Thursday that the uproar had damaged the company.

As clients withdrew their money, assets under management decreased to $1.4 trillion, dropping by around $54 billion over the quarter.

“Following unfavourable press and social media coverage based on false rumours during the first two weeks of October 2022, Credit Suisse saw a large amount of deposit and assets under management outflows,” the bank stated. “While stabilizing since this time, these outflows have not yet reversed.”