Credit Suisse looks to Mideast for capital boost

Abu Dhabi and Saudi Arabia are weighing whether to put money into its investment bank and other businesses.

Credit Suisse headquarters in Zurich, Switzerland.
Credit Suisse has approached at least one Middle Eastern sovereign wealth fund for a capital injection [File: Sebastien Bozon/AFP]

Credit Suisse Group AG has turned to Middle Eastern sovereign wealth funds for a capital boost, news agencies report.

The scandal-hit Swiss bank has approached at least one Middle Eastern sovereign wealth fund for a capital injection, Reuters reported on Monday, citing an unnamed source.

Abu Dhabi and Saudi Arabia are weighing up whether to put money from their sovereign wealth funds into Credit Suisse’s investment bank and other businesses, Bloomberg News reported. Such an investment could take advantage of their low valuations, the report said.

Credit Suisse’s investment banking chief, Christian Meissner, will be leaving the bank once it has announced a strategic overhaul on October 27, a source familiar with the situation told Reuters.

The size and other details of a potential capital injection could not be learned.

A spokesperson for Credit Suisse declined to comment, saying the bank would update its strategy review when it announces third-quarter earnings.

The largest Middle Eastern sovereign fund investor in Credit Suisse, the Qatar Investment Authority, declined to comment. Abu Dhabi’s Mubadala also declined to comment. The Abu Dhabi Investment Authority and Saudi Arabia’s Public Investment Fund did not immediately respond to requests for comment.

Credit Suisse’s shares were trading up more than 4.5 percent during midday trading in New York after the news reports were released.

Credit Suisse, one of the largest banks in Europe, is trying to recover from a string of scandals, including losing more than $5bn from the collapse of investment firm Archegos last year when it also had to suspend client funds linked to failed financier Greensill.

Analysts have said the company might need as much as 9 billion Swiss francs ($9bn) as part of a reorganization, some of which may have to come from investors and some from the sale of assets.

It has already begun a sale process of its US asset management arm, Bloomberg News reported on Monday, citing people familiar with the matter. The unit is expected to draw interest from private equity firms, the report said.

Its approach for a capital raise indicates that the sale of assets alone may not be enough to cover the costs of an imminent overhaul that the embattled bank hopes will draw a line under heavy losses and a string of scandals.

On Monday, the Swiss lender agreed to pay $495m to settle legal action over mortgage-linked investments in the United States, adding to the billions it has been paying out to resolve legal cases linked to its residential mortgage-backed securities (RMBS) business in the run-up to the 2008 global financial crisis.

The New Jersey case was the largest of its remaining exposure on its legacy RMBS business, Credit Suisse said. Five remaining cases, all far smaller, are still in litigation.

In June, Credit Suisse was convicted of failing to prevent money laundering by a Bulgarian cocaine trafficking gang while a Bermuda court ruled that a former Georgian prime minister and his family were due damages of more than half a billion dollars from Credit Suisse’s local life insurance arm.

Credit Suisse’s chairman, Axel Lehmann, pledged on Friday to reform the bank after a “horrible” 2021 in which it lost billions of dollars, the biggest ever loss in its history.

“We are fully aware that we need to change, and we will change, clearly,” he said.

Lehmann took over at the Swiss bank in January.

Earlier this month, its shares plunged as much as 11.5 percent, hitting a record low of $3.64.

At the same time, credit default swaps — a type of investment that serves as insurance against a company defaulting — rose to all-time highs, leading to rumours that the bank was on the verge of collapse.

Source: Al Jazeera, Reuters