A foundation is reviving the once abandoned idea of an IPO for the Swiss unit of Credit Suisse. The spin-off would make the need for a capital increase rejected by shareholders less likely.
The Ethos Foundation is in favor of an IPO of Credit Suisse’s domestic market unit to regain investor confidence. The so-called “Swiss Bank”, which brings together activities for the country, is one of the four divisions that make up the entire banking group.
The Swiss shareholders’ organization regularly attends general meetings to hold large companies to account and to assert its vision of good governance. It considers the Swiss unit as the “flagship” of the group and considers it advantageous that it be listed separately, the group indicated to the “Time» (in French) newspaper.
The Swiss bank has good skills, especially in its small and medium-sized business lending business, Ethos said. An IPO of this division would be a good solution that could be put in place quickly, according to the activist shareholder, who also represents various pension funds.
According to Ethos, an IPO of the Swiss bank would send a strong message to the market and sees it as a way to materialize the change in strategy.
Additionally, an IPO would allow long-term investors such as pension funds to continue investing in Credit Suisse without exposing themselves to investment banking risks, the foundation argues.
The ex-CEO laid the foundations
Under the direction of Tidjane Thiam, CEO of Credit Suisse between 2015 and early 2020, the company considered a partial IPO of the division to raise funds for an earlier restructuring. Finally, 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 financial company Greensill in March 2021, in which 10 billion dollars were invested whose recovery of funds is subject to litigation. The implosion of the American fund Archegos has worsened the setbacks of Credit Suisse to the tune of around 5 billion dollars.
Applause from shareholders
CEO Ulrich Koerner is currently considering new strategies to make the bank profitable again. The plans call for a reduction of 1 billion francs in costs over several years and a reduction in the workforce of the investment bank. Conversely, asset management and Swiss activities should be strengthened.
The Swiss bank is considered the crown jewel of the group in terms of revenue. Swiss CEO André Helfenstein recently highlighted for finenews.com that it is not at the top of the priority list for adjustments.
Therefore, an IPO could raise funds urgently needed to create shareholder value. This, along with the sale of other business units, would also likely avoid a dilutive capital increase, which shareholders have no interest in at Credit Suisse’s current low share price.