Credit Suisse will buy back up to 3 billion Swiss francs ($3 billion) of debt in a bid to show its financial strength and reassure investors worried about the cost of a planned restructuring.
Speculation about the Swiss bank’s future has gained traction on social media over the past week, amid rumors that the bank may need to raise capital in the order of billions of francs, which has sent stocks and bond prices plummeting.
Credit Suisse announced an offer to repurchase 1 billion euros in cash on eight euro or pound sterling-denominated senior debt securities and another offer to repurchase 12 dollar-denominated senior debt securities for up to $2 billion.
The buyback reduces the bank’s debt and is an attempt to boost investor confidence, although core questions about its restructuring – and whether or not it will need new capital to finance it – remain open.
The bank said the operation “allows us to take advantage of market conditions to buy back debt at attractive prices.”
Credit Suisse shares were up 5.2% at $4.44 each around 10:15 am ET. The price of its euro-denominated bonds advanced earlier.
Christian Schmidiger, an analyst at Zuercher Kantonalbank, said the bonds are currently trading at a high discount, which has allowed Credit Suisse to reduce debt at a low cost. He added that the move was also a “signal that Credit Suisse has sufficient liquidity”.
The buyback was announced after sources recently told Reuters that Credit Suisse was probing investors for funding, approaching them for the fourth time in about seven years.
One of Europe’s biggest banks, Credit Suisse is trying to recover from a series of scandals, including a loss of more than $5 billion from the collapse of investment firm Archegos last year.
Under a restructuring launched by chairman Axel Lehmann, the bank expects to shrink its investment banking business to focus even more on wealth management.
In the last three quarters alone, Credit Suisse’s losses amounted to nearly CHF4 billion. Given the uncertainties, the bank’s funding costs soared.
Source: CNN Brasil
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