Credit Suisse may face €8.3bn capital shortfall in 2024

Credit Suisse Group faces a capital shortfall of as much as 8 billion Swiss francs (€8.3 billion) in 2024, analysts at Goldman Sachs Group estimate, underscoring the challenges for the troubled lender as it nears what’s likely to be a deep restructuring.

At the very least, the Zurich-based firm is facing a hole of 4 billion Swiss francs, given the need to restructure the investment banking operations at a time of “minimal capital generation”, analysts led by Chris Hallam wrote. That means it would be “prudent for the lender to raise capital”.

“Credit Suisse continues to face cyclical and structural challenges,” the analysts wrote in a note, maintaining a sell recommendation on the stock.

The firm is exploring radical cuts to its volatile investment bank, including spinning off large parts and hiving off its securitised products group, as chief executive Ulrich Körner seeks to put an end to years of scandals and losses. Yet with a key question — how to pay for it — unanswered roughly two weeks before he’s due to present his plan, speculation about the lender’s financial strength has sent its shares on a rollercoaster ride.

How much tax do I have to pay on the sale of shares that I inherited?

---

‘I remember what it was like to count my pennies. Money allows me to live a life I’ve always dreamed of’

---

Ireland’s stock exchange is in trouble and needs our help

---

Ireland’s housing market is a byproduct of three mega-trends

---

The stock rose as much as 2 per cent on Tuesday.

While raising capital is one option under consideration, Credit Suisse executives would strongly prefer not to issue equity with the share price near record lows, Bloomberg News previously reported.

Credit Suisse had a CET1 capital ratio of 13.5 per cent at June 30th, well above the international regulatory minimum of 8 per cent and the Swiss requirement of about 10 per cent. Its liquidity coverage ratio is one of the highest among European and US banking peers.

Goldman’s comments were echoed by Jefferies analyst Flora Bocahut, who said in a note on Tuesday that Credit Suisse needs to build about 9 billion Swiss francs of capital in the next two to three years. But given the dilutive nature of a capital increase, Bocahut expects it to prioritise asset disposals, she wrote in a note.

Bloomberg reported on Friday that bidders were lining up for the bank’s securitised products unit, a key pillar in the downsizing of its investment banking operations. The sale process, which is far advanced, has drawn interest from Pimco, Sixth Street and an investor group including Centerbridge Partners.

The bank is also considering bringing in an outside investor to take a partial stake and inject money into a spin-off of its advisory and investment bank businesses, people familiar with the matter have said.

Credit Suisse has also said it is working on possible asset and business sales as part of the plan, scheduled for October 27th, alongside earnings. Other potential disposals include the sale of its Latin American wealth management operations excluding Brazil, according to people with knowledge of the matter. The Latin America region accounts for about $100 billion of client assets and loans. That includes its business in Brazil, where it also has significant investment banking activities.

Closer to home, the bank is also considering selling its 200-year-old renowned Savoy Hotel, located in the heart of Zurich’s financial district. The building could be worth 400 million Swiss francs.

— Bloomberg