Oliver Hirt

ZURICH (Reuters). Credit Suisse is still weighing its options after a series of losses that have eroded its financial buffers. Two people familiar with the situation told Reuters.

One person said that the magnitude of this increase is likely to surpass 1 billion Swiss Francs ($1.04 trillion), however, it has yet to be determined. This was due to internal deliberations.

A cash injection by Switzerland’s Second-Biggest Bank would allow it to recuperate from billions of dollars in losses and other legal issues.

While selling shares is the best option for some investors, Credit Suisse doesn’t rule out tapping all of them, according to this source.

The other person stated that a possible sale of a business like Credit Suisse’s Asset Management Division is also an option. They said that the bank was yet to decide on any possible action. The second half of the year was planned for any transaction.

“Credit Suisse is currently not considering raising additional equity capital,” the bank said in a statement.

With a CET1 of 13.8%, and CET1 leverage of 4.3% respectively, the Group is well capitalised. Asset Management is an essential part of our group strategy presented last November, with four core divisions.”

CET1 is an indicator of financial strength.

DEBT DOWNGRADES

Credit Suisse is suffering from massive losses of billions incurred in 2021 through failed investments.

Bank has attempted to improve its risk management culture. It also tried to turn the page after a string of scandals that led many waves of managerial shake-ups and abrupt departures.

In the last year, shares in this bank have dropped by over a fifth.

Fitch and Standard & Poors both downgraded their debt ratings for Credit Suisse this month.

According to one source, Credit Suisse was rated at 4 by FINMA (the Swiss Financial Watchdog) in its annual assessment of large Swiss banks. This is the lowest grade possible.

This source stated that capitalisation at the group level was one of the main concerns for watchdogs.

FINMA did not respond to our request for comment. After obtaining mandatory convertible notes from around 1.75 million investors, the Swiss bank received capital booster discussions in December 2008.

Credit Suisse had reduced the requirement for new capital in April even though it announced a loss of first quarter that intensified its financial problems.

Credit Suisse executives stated at that time that capital would remain restricted over the next six-months as the bank continues making significant outlays toward compliance and risk. However, a source close to the matter indicated that a capital rise was not in the cards at this time.

Core capital ratio of the bank fell from 14.4% to 13.8% in 2021 to 13.8% at its end of the 1st quarter 2022.

A capital increase could boost Credit Suisse’s financial position and send a positive message. According to one source, a new capital increase by well-known investors could signal confidence.

($1 = 0.9572 Swiss francs)