A Credit Suisse activist investor may not have the heft to enforce a split-up of the Swiss bank, but his engagement may help to get rid of a major crisis-era investor.
There is little sign that Zurich-based hedge fund manager Rudolf Bohli will be able to see through plans to split up Credit Suisse in order to wring more value from the Swiss bank's three individual parts – private banking, asset management, and investment banking.
Bohli's RBR Capital Advisors vehicle simply doesn't have enough stock and influence to sway big institutional investors, who have already reacted coolly to the idea.
But Credit Suisse stock can nevertheless be expected to gain in the months leading up to its shareholder meeting in April. This is due more to CEO Tidjane Thiam's three-year restructuring efforts than the hedge fund's activism.
«Monetize» Credit Suisse?
This will be music to investors' ears, but for one in particular: the Qatar Investment Authority. The sovereign wealth fund poured billions into Credit Suisse in 2008, allowing the Swiss bank to avoid the painful state rescue that UBS was forced to accept.
Today, Qatar owns less than five percent of Credit Suisse, a stake that it has been whittling down in recent months. Why? The oil-rich, secretive emirate doesn't telegraph its thinking, but Qatar is under massive geopolitical pressure from its Middle East neighbors over ties to Iran. Over months, this has crimped Qatar's access to funds, leading the emirate to «monetize» some shareholders to tide itself over.
Juicy Coco Coupon
Thus far, Qatar hasn't touched its most valuable shareholding in Credit Suisse: two convertible bonds with a nominal value of 2.5 billion Swiss francs and $1.72 billion, respectively. The so-called cocos are the result of a 2011 rebuke of the bank, then led by investment banker Brady Dougan, to lift its wafer-thin capital as soon as possible, in any way possible.
Qatar, then flush with cash, stepped in and bought the instruments, which pay a juicy 9 percent and 9.5 percent annual coupon, respectively. The Gulf state has drawn more than 380 million francs annually from the savvy investment – the cocos are set up as perpetual, meaning they don't expire.
Buyback Planned
That could change soon: next October is the first chance for Credit Suisse to «call» the paper, meaning the bank can either buy them back or replace them with other, presumably less high-yielding paper. Inside Credit Suisse, executives have quietly decided to buy back the paper when they become callable next year, finews.asia has learned from several sources.
A spokesman for the bank didn't comment on whether Credit Suisse would call the paper, but emphasized that Qatar's investment during the financial crisis of 2008-09 was welcome.
Qatar's cash was a lifeline in 2008, but the QIA left little strategic imprint on Credit Suisse. The emirate's board representative, Jassim Bin Hamad J.J. al Thani, was better known for frequent cigarette breaks than strategic brainstorming. It surprised no one when the 35-year-old scion of Qatar's ruling family left the bank's board earlier this year and Qatar began whittling at its stake.
Back-Handed Favor
Credit Suisse is hoping that Qatar will retreat entirely next year, finews.asia has learned. The move would likely buoy the shares as well as free up large chunks of bank stock, potentially for other, more active institutional investors to buy.
Bohli, an obsure hedge fund manager with little financial firepower to back him up, doesn't have any connection to Qatar. But ironically, his plan to split up Credit Suisse plays into the sovereign wealth fund's hands. The activist may end up doing Credit Suisse a back-handed favor by paving the way for an elegant exit by the emirate.
