A foundation is reviving the once-discarded idea of an initial public offering of Credit Suisse's Swiss unit. The spin-off would make the need for a capital increase spurned by shareholders less likely.
The Ethos Foundation favors an initial public offering of Credit Suisse's home market unit to regain investor confidence. The so-called «Swiss bank» which combines activities for the country, is one of four divisions that make up the entire banking group.
The Swiss shareholders' organization regularly appears at general meetings to demand accountability from large companies and to put forward its views of good governance. It regards the Swiss unit as the «flagship» of the group and considers it advantageous were it to be listed separately, the group told the «Le Temps» (in French) newspaper.
The Swiss bank has good competencies, especially in its lending business with small and medium-sized enterprises, Ethos said. An IPO of this division would be a good solution that could be implemented quickly, according to the shareholder activist, who also represents various pension funds.
Strong Message
According to Ethos, an IPO of the Swiss bank would send a strong message to the market and sees it as a means of implementing the change in strategy.
Moreover, an IPO would allow long-term investors such as pension funds to continue investing in Credit Suisse without being exposed to the risks of investment banking, argues the foundation.
Ex-CEO Laid Groundwork
Under the leadership of Tidjane Thiam, Credit Suisse CEO between 2015 to early 2020, the firm considered a partial IPO of the division to raise money for an earlier restructuring. In the end, the board of directors changed its mind, opting for a capital increase of 4 billion Swiss francs.
Since then, the bank has been repeatedly rocked by scandals, suffering from the collapse of the British finance company Greensill in March 2021, in which $10 billion was invested of which recovery of funds is under litigation. The implosion of the US fund Archegos added to Credit Suisse's woes to the tune of about $5 billion.
Shareholder Applause
CEO Ulrich Koerner is currently considering new strategies to make the bank profitable again. Plans call for cutting 1 billion francs of costs over several years and downsizing the investment bank. Conversely, asset management and the Swiss business are likely to be strengthened.
The Swiss bank is considered the group's crown jewel in terms of revenue. Switzerland CEO André Helfenstein recently stressed to finews.com that it is not at the top of the priority list for adjustments.
Accordingly, an IPO could raise urgently needed funds to create shareholder value. This and the sale of other business units would likely also avoid a dilutive capital increase, for which shareholders have no at Credit Suisse's low current share price.
