Half-in or half-out? Credit Suisse keeps options open with investment bank break-up and First Boston revival
Credit Suisse has finally lifted the lid on its reorganization. But for all the frenzy of deal making it now plans, questions still remain over whether recasting the investment bank as a nostalgic partnership with a throwback name is the answer to the bank's strategic problems.
It has been a rotten year for investment banking, with primary equity and debt markets shut for long periods and M&A deal volumes down. Nevertheless, Credit Suisse has unveiled so many transactions in its long-awaited reorganization that it looked like the bank might be making a bold effort to revive the business all on its own.
On October 27, along with a widely predicted and largely ignored loss for the third quarter, it announced a SFr4 billion ($4.03 billion) capital raise. Before the end of this year, it also hopes to finalize the terms on one large disposal of the majority of its securitized products group (SPG).
Credit Suisse will also return to the debt capital markets with $2 billion of additional tier-1 offerings and perhaps $4 billion of holding company senior non-preferred debt in the next two months.
The bank had “self-selected not to issue in October,” according to new chief financial officer Dixit Joshi. Perhaps that was because it couldn’t. Credit Suisse’s credit spreads widened alarmingly in the first two weeks of the month and it lost deposits at a rapid clip as its share price slumped amid speculation of big costs to come from the radical restructuring of its investment bank.