Amid years of scandals, mismanagement, mammoth asset outflows, and the current dilution from a vital capital raise that is under way, Credit Suisse shares have plunged for 13 straight days (the longest losing streak in the bank’s history) to a new record low, just a few percent above the price of 2.52 francs for the 4 billion Swiss Franc subscription rights that the bank offered existing investors.
The threshold of 2.52 francs is “the ‘hard underwriting’ price for the consortium of 19 banks,” JPMorgan & Co. analysts said in a research note.
If Credit Suisse’s shares keep trading above that level until “the last day of rights trading on Dec 6, 2022, we can assume at that point the capital raise was most likely a success.”
If not, then who knows what’s next?
As Bloomberg reports, while the rights offer is “highly unlikely” to fail, such a scenario would cause S&P to “evaluate” the impact on the credit ratings it has placed on Credit Suisse, analyst Anna Lozmann said by email. She also said that “continued strong outflows of deposits” could be a “trigger for a negative rating action.”
Credit Suisse’s overhaul, including job cuts and the carve-out of the investment banking business, has met with skepticism from analysts and investors concerned about the complexity of the restructuring.
And today, Bloomberg reports that, according to two people familiar with the bank’s plans, CS is cutting at least a third of its debt sales positions globally as part of a restructuring that will eliminate thousands of jobs and a new strategy that drastically downsizes its investment banking and trading business.
The Swiss lender is reducing headcount in its debt syndicate division, which prices bond deals, as it slims down its so-called flow business.
The Zurich-based bank plans to reduce costs by cutting 2,700 jobs this year and 9,000 jobs by the end of 2025.
The “material capital raise” and lack of details on a “very complex” investment banking restructuring is weighing on Credit Suisse’s shares, JPMorgan analyst Kian Abouhossein wrote in a note on Thursday.
He also cut earnings estimates by 45% for 2023, citing the hefty outflows in the bank’s wealth management business.
Talks about a possible takeover of Credit Suisse are likely to pick-up if outflows continue, he said.