Credit Suisse plans £3bn fundraising to boost capital

Image source, Reuters

Credit Suisse says it plans to raise 4bn Swiss francs (£3.14bn) from shareholders in an effort to strengthen its capital base.

The Swiss lender put on hold a plan to sell shares in its domestic banking business and posted a first quarter profit of 596m Swiss francs.

That compares with a 302m Swiss franc loss a year ago.

Swiss banks are under pressure from regulators to boost capital to protect them from financial shocks.

The bank raised about 6bn francs from shareholders in 2015.

As well as asking its owners for cash to mend its balance sheet, Credit Suisse has said it is in the middle of a 5,500 job-cutting programme.

'Concern zone'

Raising the new money will increase its tier-one leverage ratio - how much capital it has to absorb losses from lending as a percentage of its total lending - to about 5.1%, it said.

Bernstein analyst Chirantan Barua said: "The capital raise should be enough to allay concerns in the near term, but doesn't really give the franchise the flexibility to see it through a downturn or meaningfully compete in global markets.

"We feel this raise doesn't really take capital totally out of the concern zone."

Mr Barua had estimated that the bank would raise 5bn Swiss francs.

'Encouraging' quarter

Earlier this month, Credit Suisse chief executive Tidjane Thiam and the bank's board of directors offered to cut their bonuses by 40%.

The Swiss bank has posted two straight years of losses, but its top 12 executives were awarded 78m Swiss francs in pay this year.

Credit Suisse investors are set to meet on 28 April. Under Swiss law, they get a binding annual vote on executive pay. The capital raising will be voted on at another meeting on 18 May.

London-based lender Standard Chartered, also reporting results, said profits almost doubled in the first quarter after losses from bad loans declined.

The bank posted a pre-tax profit of $1bn (£780m), up from $589m in the same period a year ago. The bank set aside $198m for bad loans, less than the $500m expected by analysts.

"This is an encouraging first quarter but we are not getting carried away," said chief financial officer Andy Halford.

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