Credit Suisse set to raise billions in capital after heavy loss

ZURICH  – Credit Suisse, battered by years of scandals, plans to raise 4 billion Swiss francs ($4 billion) by selling stock while slashing thousands of jobs and spinning off its investment bank in an effort to recover from a run of heavy losses.

The troubled Swiss bank outlined what its chairman Axel Lehmann dubbed a “blueprint for success”, after racking up a 4 billion Swiss franc loss in the third quarter of the year and following torrid weeks for the group.

Credit Suisse clients pulled funds in recent weeks at a pace that saw the lender breach some regulatory requirements for liquidity, the bank said on Thursday, underscoring the impact on its business of wild market swings and a social media storm.

The group added that it was stable throughout.

Saudi National Bank, the Kingdom’s biggest lender, committed to invest up to 1.5 billion francs in Credit Suisse to achieve a shareholding of up to 9.9 percent.

The Swiss bank said it also aims to separate out its investment bank to create CS First Boston, focused on advisory and capital markets, and hopes to attract third-party capital and set up a partnership with the new Credit Suisse.

SNB may also take part in a future capital raising by Credit Suisse “which aims to support the establishment of an independent investment bank focused on advisory and capital markets activities,” the Saudi lender said in a bourse filing.

Credit Suisse said it will create a capital release unit to wind down non-strategic, higher-risk businesses, while announcing the sale of a large part of its securitised products business.

The bank’s overhaul, aiming to put behind it the worst crisis in its history, is the third attempt in recent years by successive CEOs to turn around the embattled group, which on Thursday also reported a third-quarter loss of more than 4 billion francs.

Once a symbol for Swiss reliability, the bank’s reputation has been tarnished by a series of scandals, including an unprecedented prosecution at home involving laundering money for a criminal gang.

The bank had been rushing to raise money and free up capital by selling assets, keen to limit how much cash it would have to raise from investors to fund its overhaul, handle its legacy litigation costs and retain a cushion for rough markets ahead.

Credit Suisse needs to revamp after a series of costly and morale-sapping blunders that triggered a wholesale change of management, a halt in dividend payments and an urgent rethink about its future.

($1 = 0.9858 Swiss francs)