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October 21, 2015 at 09:21 AM
(Bloomberg) — Credit Suisse Group AG investors questioned CEO Tidjane Thiam’s plan to prioritize wealth management over the investment bank and rely on growth in Asia while tapping shareholders to bolster capital.
In the multi-year plan the bank will reorganize along geographical lines and split and shrink the securities unit, Credit Suisse said on Wednesday. The company plans to hold an initial public offering of the Swiss business to raise funds and make acquisitions, while cutting 5,600 jobs across the U.S., the U.K. and Switzerland.
The shares fell after the strategy announcement by Thiam, 53, the chief executive officer recruited in July to rebuild investor confidence in a bank struggling with tougher capital demands and record-low interest rates. The plan didn’t spell out details of how the company will more than double profit in Asia and Thiam said he would not provide a target for profitability because only a “fool” would commit to something he can’t control.
“There’s still a lot of uncertainty over this strategy,” said Lutz Roehmeyer, who helps manage 11 billion euros ($12.8 billion) at LBB Invest in Berlin. “You can’t yet say what the growth is going to look like and where it’s really going to come from. I just don’t know if wealth management really is the panacea.”
The shares dropped as much as 5.2 percent and were 3.9 percent lower as of 4:36 p.m. in Zurich. The STOXX Europe 600 Banks Index fell 0.8 percent.
Profit Falls
Credit Suisse will raise 6.05 billion Swiss francs ($6.3 billion) by selling 1.35 billion francs of stock to select shareholders and 4.7 billion francs of shares to existing investors as regulators in Switzerland prepare to require larger capital buffers. The company “assumes” that Switzerland will raise its leverage ratio to 5 percent, Thiam told reporters. He didn’t say more about who the select investors were.
“We are rebooting the company, we are solving our capital issues,” Thiam, 53, said in an interview with Bloomberg Television. “One of our objectives coming in was to take capital off the table to raise enough capital so that this would not be again a topic of conversation at quarterly results.”
The bank on Wednesday said third-quarter profit fell, missing analyst estimates, in part because of a bigger-than- expected drop in handling clients’ money, the business the company wants to expand. The bank will take a “substantial impairment” charge in the fourth quarter as it writes down goodwill in the investment bank, Chief Financial Officer David Mathers told investors in London.
Swiss IPO
Credit Suisse aims to sell 20 percent to 30 percent of its Swiss bank in an IPO by 2018, estimating the sale would raise between 2 billion francs and 4 billion francs. The IPO would allow Credit Suisse to buy private banks that will probably come up for sale, Thiam said. The goal is to create a bank focused on wealthy private, corporate and institutional clients, it said.
Credit Suisse aims to return to investors 40 percent of the excess capital expected to reach 23 billion francs to 25 billion francs by 2020. The payout is low and will be seen as disappointing, according Nomura Holdings Inc. analysts led by Jon Peace.
