Credit Suisse Said to Weigh Stock Sale Instead of Swiss IPO

(Bloomberg) -- Credit Suisse Group AG is considering selling stock valued at more than 3 billion Swiss francs ($3 billion) as an alternative to its longstanding plan to raise capital by listing part of its Swiss unit, according to people with knowledge of the matter.

Credit Suisse may sell new shares representing up to 10 percent of its outstanding stock, or about 3.1 billion francs, through an accelerated sale to money managers, which wouldn’t need investors to sign off, the people said, asking not to be named as the details aren’t public.

The sale could exceed that amount. The lender has spoken with some advisers about raising as much as 5 billion francs, subject to shareholder approval, the people said.

“A capital raise is a good idea,” said Peter Casanova, a Kepler Cheuvreux analyst with a buy rating on the stock. “I’d prefer to see a capital hike compared to an IPO." An initial public offering for the Swiss business would be more costly and would require Credit Suisse to forgo one of its most important assets, he said.

Credit Suisse is in the second year of a turnaround plan to shrink its securities business while expanding in wealth management. After tapping shareholders for 6 billion francs when the overhaul began in late 2015, Credit Suisse said it would seek to address further capital needs by listing part of the Swiss unit. A smaller-than-expected hit to buffers from a legal settlement over toxic mortgage securities in December has given the firm more options.

No final decisions have been made and Credit Suisse may decide against a share sale, the people said. Meanwhile, preparation is continuing on the IPO, one of the people said.

Fundraising Needs

A representative for Credit Suisse declined to comment.

Credit Suisse fell as much 3.6 percent in Zurich trading on news of the possible capital increase, closing 2 percent lower Thursday at 14.56 francs.

David Herro, chief investment officer of one of Credit Suisse’s top three shareholders, said he doesn’t think the company requires either a stock sale or the Swiss IPO.

“I am unconvinced that either are needed at this point in time,” Herro, the CIO of Chicago-based Harris Associates, said by email.

The recovery in the bank’s shares from their trough in mid-2016 makes a stock sale an attractive alternative, analysts at UBS Group AG led by Daniele Brupbacher said in February. The shares have gained more than 40 percent since July, giving the bank a market value of about 30 billion francs.

Thiam’s Alternatives

Chief Executive Officer Tidjane Thiam told Bloomberg Television in February the bank could explore alternatives to the IPO after its $5.3 billion settlement over toxic mortgage securities hurt its capital buffers less than estimated. In an interview with Swiss newspaper Finanz und Wirtschaft this week, Thiam said he hopes to make a decision on capital options as soon as possible. Credit Suisse’s annual meeting with shareholders is scheduled for April 28.

Investors are returning to European banks in the belief economic growth and rising interest rates could strengthen earnings. German rival Deutsche Bank AG said this month it would raise 8 billion euros ($8.6 billion) by selling stock to strengthen its capital reserves and boost growth. Italian lender UniCredit SpA successfully raised 13 billion euros from investors in February.

To contact the reporters on this story: Ruth David in London at rdavid9@bloomberg.net, Jan-Henrik Förster in Zurich at jforster20@bloomberg.net, Eyk Henning in Frankfurt at ehenning1@bloomberg.net, Dinesh Nair in London at dnair5@bloomberg.net.

To contact the editors responsible for this story: Aaron Kirchfeld at akirchfeld@bloomberg.net, Cindy Roberts, Jon Menon