ZURICH, October 7 (Reuters) – Credit Suisse Bank (CSGN.S) The Swiss bank said on Friday it will buy back up to 3 billion Swiss francs ($3 billion) of debt, showing its strength as it seeks to reassure investors after a turbulent week.
The move reduces the bank’s debt and is an attempt to boost confidence after sharp falls in stock and bond prices. Unconfirmed rumors that her future is in doubt have spread on social media amid fears that she may need to raise billions of francs in fresh capital.
Credit Suisse, one of Europe’s largest banks, has embarked on a dramatic transformation after losing more than $5 billion from the collapse of investment firm Archegos last year, when it was also forced to suspend client funds linked to failed financier Greensell.
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Bank executives spent last weekend reassuring big clients and investors about their financial strength, in an effort to dispel speculation about his future.
CEO Ulrich Koerner also told employees in a note that he had sufficient capital and liquidity. Read more
But his words only fueled rumors about the bank, as the storm intensified on social media, leading to the sale of its shares.
The debt buyback “will allow us to take advantage of market conditions to buy back debt at attractive rates,” the bank said.
Investors encouraged. Shares of Credit Suisse rose as much as 3% in early trading Friday, while the prices of its euro-denominated bonds rose.
“It’s an opportunistic move to take advantage of market conditions that may be reassuring for some investors,” said Andreas Vendetti, analyst at Vontobel. “If the purchase is made at a lower than average price, it will lead to a slight increase in capital.”
wrong chapter
Earlier this week, in an unusual move, the Swiss National Bank, which oversees the financial stability of banks of systemic importance in Switzerland, said it was monitoring the situation at Credit Suisse.
Banks are systemically important if their failure is to undermine the Swiss economy and financial system.
The move is reminiscent of the buyback of billions of euros of debt by Deutsche Bank in 2016, when it faced a similar crisis and doubts about its future.
Dixit Joshi, a former CEO of Deutsche, recently joined Credit Suisse as Chief Financial Officer.
Zuercher Kantonalbank said the bonds are currently trading at a high discount, allowing Credit Suisse to reduce debt at a lower cost. Analyst Christian Schmidger said the move was also a “signal that Credit Suisse has sufficient liquidity”.
Credit Suisse said it was making a €1 billion cash offer in relation to a large €8 or £1 debt note and another offer to buy back 12 US dollar-denominated large IOUs for up to $2 billion.
The developments unfolded after sources told Reuters recently that Credit Suisse is looking to investors for fresh money, approaching them for the fourth time in about seven years.
Under the restructuring initiated by Chairman Axel Lehmann, the bank envisions downsizing its investment bank to focus more on its core wealth management business. Mainly, he hopes to close a turbulent chapter of the bank and repair its reputation.
Over the past three quarters alone, losses have increased nearly CHF4 billion. Given the skepticism, the bank’s financing costs soared.
The bank is due to present its new business strategy on October 27, when it announces third-quarter results.
Moody’s chief analyst at the bank told Reuters on Thursday that rating agency Moody’s Investors Service expects Credit Suisse’s losses to increase to $3 billion by the end of the year. Read more
The bank also said it was looking to sell the upscale Savoy Hotel, one of Zurich’s most popular hotels. Read more
(dollar = 0.9897 Swiss francs)
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Written by John Revell and John O’Donnell; Additional reporting by Amanda Cooper in London. Editing by Mark Potter and Jason Neely
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