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Credit Suisse Shares Hit Record Low on Strategy Questions

·3 min read
Credit Suisse Shares Hit Record Low on Strategy Questions

(Bloomberg) -- Credit Suisse Group AG shares slumped to a record low as investors signaled that doubts remain over the troubled lender’s upcoming strategy revamp and its capital position.

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The bank on Thursday issued a denial after a Reuters report that it’s weighing moves as drastic as its investment bank exiting the US market. The firm also faces questions of whether it will need to raise capital through asset sales or a stock offering to fund any moves it plans to make in a new strategy that’s due next month.

“Credit Suisse is not exiting the US market. Any reporting that suggests otherwise is categorically false and completely unfounded,” a representative for the bank said in a statement late Thursday.

Credit Suisse is sounding out investors for a possible capital raise, Reuters reported. Analysts at Deutsche Bank AG said last month that Credit Suisse faces a capital gap of at least 4 billion Swiss francs ($4.1 billion) to improve its financial strength, fund its restructuring and support growth. The Swiss bank’s leaders have said they’re comfortable with the firm’s capital position.

Credit Suisse fell as much as 10% on Friday and traded 9.6% lower at 4.20 Swiss francs as of 1:27 p.m. in Zurich. The stock has declined by about two-thirds since the twin scandals surrounding Greensill Capital and Archegos Capital Management early last year.

The bank is in the midst of electing which businesses to cut, exit or keep as part of its second restructuring in less than a year. New Chief Executive Officer Ulrich Koerner and Chairman Axel Lehmann are seeking to shore up confidence in the lender and return it to profitability after a string of losses and missteps.

Credit Suisse’s top executives and board members are weighing several options as they look to stem the historic stock rout. The firm has been talking to potential buyers for its securitized products group, a trading business with $75 billion in assets by one measure, and has floated the idea of giving dealmakers an equity stake in their unit, auguring a possible spinout, Bloomberg has reported.

A bank spokesman reiterated the firm’s statement that it will update investors on the strategy review when it reports third-quarter earnings next month. “It would be premature to comment on any potential outcomes before then.”

Analysts at Citigroup Inc. indicated skepticism that a broad exit from the US market would be desirable. On one hand, the lender’s intention to attract outside capital to its securitized products business along with the potential review of leveraged finance and credit businesses “would fit with a larger exit from the US,” analysts including Andrew Coombs wrote in a note.

But “while the long-term capital release potential is sizable we fear that capital could get ‘trapped’ in the US, while the near-term charges could be substantial,” they wrote. “This may prove a step too far.”

(Updates share move. A previous version of this story corrected the day in 3rd paragraph.)

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