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Credit Suisse has announced a SFr4bn ($4bn) capital raise and says it will shelve plans for a partial sale of its Swiss business.
Investors had expected limited news on the bank’s closely watched capital plans since it is not on the agenda for Credit Suisse’s shareholders meeting on Friday.
But in its results announcement on Wednesday morning, Credit Suisse said it would hold an extraordinary general meeting on May 18 where shareholders would vote on:
Raising capital by way of a fully underwritten rights offering for which the net proceeds are expected to amount to approximately CHF 4 billion and retaining full ownership of Swiss bank.
The SFr4bn figure is at the higher end of the SFr2-SF4bn capital gap the bank identified in February when it said it was considering shelving the Swiss listing.
Credit Suisse is also proposing to move to an all cash dividend in the future, so that dividends paid in new shares do not dilute investors. The bank said the almost 380m of new shares would be “firmly underwritten by a banking syndicate”.
Existing shareholders will be offered the new stock at a discount. If they do not take take it up, Deutsche Bank and Morgan Stanley have signed up as underwriters.
“1Q 2017 (the first quarter) has provided further confirmation that we are delivering profitable and compliant growth, that we are executing with discipline and that we have generated positive momentum across our businesses,” Credit Suisse said.
This capital increase will allow us to continue (i) to invest in profitable growth opportunities where we generate attractive returns; (ii) to strengthen balance sheet resilience for our clients and other stakeholders; and (iii) to afford the costs associated with our ongoing restructuring plans.
Credit Suisse beat analysts’ expectations for the first quarter by delivering pretax profits of SFr889m against the SFr648m expected. The bank’s common equity tier one ratio (CET1) – a key measure of financial strength – rose to 11.7 per cent from 11.5 per cent at the end of December, better than the 11.5 per cent analysts expected.
After the capital raise, Credit Suisse expects a CET1 ratio of 13.4 per cent.