Credit Suisse in search of liquidity thinks about the sale of real estate and prepares the stew of assets

Credit Suisse continues to seek liquidity ahead of October 27, when CEO Ulrich Körner will present the bank’s restructuring plan. The Savoy hotel in Zurich is on sale, as is the sale of the campus of the bank, valued at 1.3 billion euros. In anticipation, sources close to the dossier report, also the stew of US activities. Also re-proposing the historic First Boston brand, a reminiscence of when the lending institution poured into calm waters. Meanwhile, the resignation in the Hong Kong division does not stop, as do the concerns of investors, with Credit default swaps (CDS, derivatives to insure with the default of a security) again above 370 basis points.

The rush to raise fresh capital in order to put it is hectic. According to rumors circulating in financial circles, 5 billion euros are needed between now and 27 October. And that is why Credit Suisse is considering divesting several assets in its portfolio. One of these is the Savoy Hotel on Paradeplatz in Zurich, just to the left of the bank headquarters. Negotiations are ongoing. On the other hand, the situation regarding the Credit Suisse campus in Zurich becomes more complicated. The two South Korean funds involved, KB Securities and Igis, have withdrawn from the tender. And now the property, which Credit Suisse sold to Norges Bank ten years ago (but with a lease agreement until 2037, renewable for 15 years), is back on the market. If the Norwegian sovereign wealth fund succeeds and concludes the transaction by October 27, it could support the capital increase that will come. After all, the relations between Credit Suisse and Norges have always been friendly and collaborative, as underlined by several financial sources close to both entities.

In light of these movements, the analysis of options does not stop to restructure the bank’s structure. Among the hypotheses being examined by Körner and his new team, there is the divestment of various investment banking activities, including advisory, dealmaking and underwriting. The eyes are on the United States, where following the spin-off, Credit Suisse could relaunch the new company with the First Boston brand, or the financial boutique acquired at the turn of the 1980s and 1990s. The program, explain legal sources, would provide for the consolidation of assets assessed as “non-strategic” and then focus on large assets and management of private banking. This option would include cost reduction and profit maximization in sectors where the group’s credibility has not been undermined by the Archegos and Greensill scandals.

It is common opinion that a complete overhaul of the business model is necessary. And this is what the top management of the company, starting with the new financial director Dixit Joshi, have been communicating for days to large customers and banking counterparties. The job of the eight new bankers (Francesco De Ferrari, Markus Diethelm, Joanne Hannaford, Dixit Joshi, Francesca McDonagh, Christian Meissner, David Wildermuth, as well as Körner) is to present a credible plan. As legal sources explain behind anonymity, “nothing can be excluded at this juncture”. But in the meantime the number of employees looking for new accommodation is increasing. The latest in chronological order is Christopher Chua, managing director of the M&A division for the Asia-Pacific area of ​​the Swiss group, who moved to the Anglo-Asian giant HSBC.

The urgency is high, as noted by JP Morgan. “It is necessary to undertake a radical restructuring of investment banking activities rather than a gradual restructuring similar to those we have seen done many times in the last decade”, commented the analysts of JP Morgan who still attribute to the Swiss giant, tried by scandals and losses (the last three quarters have been in the red), worth at least $ 15 billion, well above the $ 11 billion it capitalizes now.

The one who closely monitors Credit Suisse’s moves is also the central bank, Thomas Jordan’s Swiss national bank (Snb). As explained by board member Andréa Maechler, there is cautious attention. And, note internal sources, “if an intervention is necessary, there will be”. Financial stability above all. The path towards 27, however, is fraught with obstacles, as can be seen on the CDs market, which is still under stress. International investors await clear responses from the bank’s management, and hope there will be no surprises on the quarterly accounts. A loss is already priced in the financial markets, but a lot will depend on its size.