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Credit Suisse seeks capital top-up from Middle East wealth funds

REUTERS/Arnd Wiegmann
Credit Suisse had already raised 1.8 billion francs by placing stock with a group of institutional investors led by Saudi National Bank

Credit Suisse Group has approached at least one Middle Eastern sovereign wealth fund for a capital injection, a source said, while some funds are looking at the scandal-hit Swiss bank’s businesses as potential investment opportunities.

Abu Dhabi and Saudi Arabia were weighing up, through their sovereign wealth funds, whether to put money into Credit Suisse’s investment bank and other businesses, Bloomberg reported. An investment would be to take advantage of low valuations, it said.

Credit Suisse’s investment banking chief, Christian Meissner, will be leaving the bank once it has announced a strategic overhaul on October 27, a source familiar with the situation said.

A spokesperson for Credit Suisse declined to comment, reiterating that it will update on its strategy review when it announces third-quarter earnings.

The largest Middle Eastern sovereign fund investor in Credit Suisse, the Qatar Investment Authority, declined to comment. Mubadala declined to comment. ADIA and PIF did not immediately respond to requests for comment.

Credit Suisse’s US-listed depository receipts closed 3.6 percent higher on Monday.

Credit Suisse, one of the largest banks in Europe, is trying to recover from a string of scandals, including losing more than $5 billion from the collapse of investment firm Archegos last year, when it also had to suspend client funds linked to failed financier Greensill.

Analysts have said the company might need as much as 9bn Swiss francs ($9bn) as part of a reorganisation, some of which may have to come from investors and some from the sale of assets.

It has already begun a sale process for its US asset management arm, with initial bids due at the end of this week, a source said. Bloomberg News, which first reported the news on Monday, said the unit is expected to draw interest from private equity firms.

Its approach for a capital raise indicates that the sale of assets alone may not be enough to cover the costs of an imminent overhaul that the embattled bank hopes will draw a line under heavy losses and a string of scandals.

On Monday, the Swiss lender agreed to pay $495 million to settle legal action over mortgage-linked investments in the US, adding to the billions it has been paying out to resolve legal cases linked to its residential mortgage-backed securities (RMBS) business in the run-up to the 2008 financial crisis.

The New Jersey case was the largest of its remaining exposure on its legacy RMBS business, Credit Suisse said, with five other cases still in litigation.

In June, Credit Suisse was convicted of failing to prevent money laundering by a Bulgarian cocaine trafficking gang, while a Bermuda court ruled that a former Georgian prime minister and his family were due damages of more than half a billion dollars from Credit Suisse’s local life insurance arm.

Credit Suisse’s chairman, Axel Lehmann, pledged on Friday to reform the bank after a “horrible” 2021 in which it experienced the biggest ever loss in its history.

“We are fully aware that we need to change and we will change, clearly,” he said.