Credit Suisse Plans $4 Billion Share-Capital Increase -- 4th Update
April 26 2017 - 4:42AM
Dow Jones News
By Brian Blackstone
ZURICH-- Credit Suisse Group AG said it planned to raise 4
billion Swiss francs ($4.02 billion) of fresh capital and abandon
plans for a partial sale of its Swiss unit as the banking giant
reported a first-quarter profit that topped analysts'
expectations.
The upbeat earnings come as a welcome reprieve for the Swiss
banking giant, which has been beset by steep losses and
uncertainties over its longer-term strategy as it scales back from
volatile, but sometimes very profitable, investment banking and
toward the more predictable business of managing money for wealthy
clients.
Credit Suisse on Wednesday posted net income of 596 million
Swiss francs, compared with a year-earlier net loss of 302 million
francs, on strong performance in its wealth-management and
global-markets divisions. Analysts had forecast net income of 332
million francs. Revenue rose 19% to 5.5 billion francs, in line
with expectations.
"We view these as impressive results," analysts at Citi wrote in
a research note.
Shares in the bank rose more than 3% in morning trading.
Still, the bank faces challenges amid political uncertainties
that it said "weighed somewhat on client volumes in the first few
weeks of April."
"We are confident in our medium-term growth prospects. However,
due to these uncertainties, we remain cautious in the short term,"
it said.
In a move to bolster its finances, Credit Suisse said it would
sell 4 billion francs of new shares, boosting its key core capital
ratio to 13.4%. "I think this does take the capital issue off the
table for Credit Suisse," Chief Financial Officer David Mathers
said on a call with reporters. Shareholders will consider the
proposal at a meeting on May 18.
Credit Suisse also said it was dropping a plan to spin off its
Swiss banking unit. The bank will now retain full ownership of the
subsidiary, which it had previously planned to partially float
through an initial public offering in the second half of the
year.
The Swiss unit posted adjusted pretax income of 483 million
francs, the fifth consecutive quarter of pretax growth on an annual
basis. The bank's international wealth-management unit reported 4%
growth in net revenue compared with last year, while revenues in
the credit and securitized-products division more than doubled on
the year.
Credit Suisse endured a bumpy 2016 as it embarked on the shift
from investment banking to wealth management. Last year ended with
a $5.3 billion settlement to resolve a financial crisis-era
mortgage backed securities case with the U.S.
The bank posted a 2.4 billion franc loss last year.
Credit Suisse had previously signaled that 2017 had gotten off
to a strong start particularly in its investment banking and
wealth-management units because of the rosier mood in financial
markets following the U.S. presidential election.
Yet the bank faces some new uncertainties that have emerged
since the start of the year. The bank's offices in Amsterdam,
London and Paris were targeted last month by authorities in a tax
investigation, though it remains unclear how serious an issue this
is for Credit Suisse, which has repeatedly cited its "zero
tolerance" approach to tax evasion.
Chief Executive Tidjane Thiam said in a call with analysts that
the bank was "surprised" by the investigation, noting the
"magnitude" of the effort the bank has made to ensure that its
clients are compliant with tax authorities.
He said there are "absolutely" a few situations where clients
may have misled the bank or provided incorrect documentation and
that Credit Suisse is cooperating with national authorities.
"This is not an area of tension," he said.
Write to Brian Blackstone at brian.blackstone@wsj.com
(END) Dow Jones Newswires
April 26, 2017 04:27 ET (08:27 GMT)
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