Oct 26 (Reuters) – Credit Suisse Group AG ( CSGN.S ) announced on Thursday that it will undergo a major strategic overhaul after losses and risk management failures put investors under scrutiny.
Analysts estimate that Switzerland’s second-largest bank could face a capital shortfall of up to 9 billion francs ($9.10 billion), depending on how much it earns from the sale of its businesses and moves to shrink its investment bank.
The lender hopes the restructuring plan, details of which are expected in third-quarter results on October 27, will reassure investors worried that the bank could revive the business without asking after shares rallied as much as 11.5% earlier this month. More money.
Credit Suisse chairman Axel Lehmann, who pledged to reform the bank, said the capital base was strong. The share price has roughly halved this year.
So far, questions about the bank’s restructuring, and whether it will need new capital to support it, remain open. Investors said earlier this month that Credit Suisse’s shares were still falling further, adding that the increase in the amount of the bank’s stock borrowed by investors indicates an increase in so-called “short selling” or “shorting” of the stock.
The bank’s financial risk hit a historic high in the week to Oct. 3, when some of its bonds collapsed earlier this month and its credit default swaps (CDS), instruments used to protect against default.
The 3 billion franc bond buyback announced on October 7 gave some reassurance to investors, and the cost of the bank’s debt exposure has fallen in recent weeks. Wednesday was close to levels seen before the market’s meltdown in early October.
($1 = 0.9891 Swiss Franc)
Reporting by Vincent Flaser and David Barbuccia; Edited by Chris Reese
Our Standards: The Thomson Reuters Trust Principles.
