Credit Suisse to raise capital as a result of Archegos ’losses
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Credit Suisse is raising 1.7 million euros ($ 1.9 million) in capital from investors in a bid to rebuild its balance sheet following the crises involving Archegos Capital and Greensill Capital, which have launched investigations by the Swiss financial regulator.
The Swiss lender said on Thursday it would sell 203 million convertible notes to existing shareholders as it seeks to raise its equity level 1 ratio from 12.2% to 13%.
Credit Suisse has suffered its biggest commercial loss in the Archegos family office in the last decade, when it was forced to suspend the $ 10 billion supply chain linked to Greensill a few weeks later.
On the other hand, Finma, the Swiss financial regulator, announced on Thursday that it had opened enforcement proceedings against Credit Suisse over potential shortcomings in risk management in its relationship with Archegos.
Earlier the regulator began an investigation into Credit Suisse’s Greensill losses.
“As a result of both cases, Finma has ordered the implementation of several short-term measures in recent weeks,” the guard said.
“These include organizational and risk reduction measures and capital surcharges, as well as reductions or interruptions in variable remuneration components. These precautionary and temporary measures are intended to complement and strengthen the steps already taken by the bank.”
The move was based on assets reported that Switzerland’s second-largest bank reported SFr757m ($ 825 million) in losses in the first quarter, warning that pre-tax losses could be as high as SFr900m previously.
The bank would have reported the best quarter at least a decade thanks to a 31% year-over-year increase in revenue, but was forced to withdraw 4.4 million euros in losses related to Archegos Capital.
“The loss we reported this quarter is therefore unacceptable,” said Thomas Gottstein, CEO of Credit Suisse. “Together with the board of directors, we have taken important steps to address this situation, as well as the supply chain funding funds.”
The bank said it sold 97% of its shares related to Archegos and forecast a loss of $ 655 million related to sales in the second quarter.
The bank also said it has settled long-term mortgage bond lawsuits in the U.S. for $ 500 billion, previously warning that the claims are worth $ 1.3 billion.
The twin crises around Greensill and Archegos have hit Credit Suisse in the past two months.
The bank’s share price has fallen 30 percent since March 1, when it froze its supply chain-linked financing group with Greensill. Credit Suisse executives have estimated that customers who invested in the funds could suffer losses of $ 3 billion after stating that they could not or did not want to pay several companies that owed them money.
A few weeks later, Credit Suisse Archegos client, a family office run by former hedge fund manager Bill Hwang, was one of the most influential global banks.
The Swiss lender wrote $ 4.7 billion later in the fall of Archegos, the biggest commercial loss in at least a decade.
The two twin imbalances have sparked regulatory investigations in several countries as Credit Suisse management began conducting its own internal probes. The bank has also announced the departures of top and middle executives in recent weeks, including head of risk and compliance Lara Warner and head of investment bank Brian Chin.
António Horta-Osório, the CEO of the Lloyds Banking Group, who will be leaving, will have to confirm that he will be the new chairman of Credit Suisse at the Bank’s AGM next Thursday.
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