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Credit Suisse boosts capital to quash central bank’s fears

Published: 08:38 18 Jul 2012 EDT

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Credit Suisse (NYSE:CS) is to bolster its capital position significantly in an effort to shrug off concerns raised by the Swiss central bank last month.

The Swiss bank told investors today it would add CHF 8.7 billion (£5.7 billion) of capital immediately, with a further CHF 6.6 billion (£4.3 billion) by the end of 2012, in “decisive measures to improve efficiency and to strengthen its capital position”.

The immediate set of actions includes the issue of convertible bonds worth CHF 3.8 billion (£2.5 billion) at a fixed conversion price of CHF 16.29 per share (1,063 pence).

“The capital measures that we announced today take any question of the strength of our capitalization off the table,” said chief executive Brady Dougan.

He added that the move would place Credit Suisse “among the strongest global banks” just weeks after the Swiss National Bank highlighted its need to “significantly expand its loss-absorbing capital”.

Credit Suisse chairman Urs Rohner added: “Given the current environment, we decided to accelerate the implementation of our capital plans in a manner which eliminates any doubts raised by the 2012 Swiss National Bank Financial Stability Report.”

The firm is also aiming to make a further CHF 1 billion (£652 million) in cost savings by the end of 2013 after initially outlining plans to save CHF 2 billion (£1.3 billion) back in 2011.

The revised target comes after the bank revealed it has already hit the CHF 2 billion (£1.3 billion) mark 18 months ahead of schedule.

Switzerland’s second largest bank also announced net profits of CHF 788 million (£514 million) for the second quarter, while pre-tax profits at its investment bank fell to CHF 383 million (£250 million) from CHF 998 million (£651 million) in the previous quarter.

“Our second quarter results underscore the strength of our business model and the positive impacts of the changes we have made to adapt it to the new environment.”

Shares in the bank lifted almost 3 per cent to US$18.19 in US pre-market deals.

 

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