Tuesday, October 11, 2022

Credit Suisse May Face $8 Billion Capital Shortfall in 2024

(Bloomberg) -- Credit Suisse Group AG faces a capital shortfall of as much as 8 billion Swiss francs ($8 billion) in 2024, analysts at Goldman Sachs Group Inc. estimate, underscoring the challenges for the troubled lender as it nears what’s likely to be a deep restructuring.

At the very least, the Zurich-based firm is facing a hole of 4 billion francs, given the need to restructure the investment banking operations at a time of “minimal” capital generation, analysts led by Chris Hallam wrote. That means it would be “prudent” for the lender to raise capital.

“Credit Suisse continues to face cyclical and structural challenges,” the analysts wrote in a note, maintaining a sell recommendation on the stock.

The firm is exploring radical cuts to its volatile investment bank, including spinning off large parts and hiving off its securitized products group, as Chief Executive Officer Ulrich Koerner seeks to put an end to years of scandals and losses. Yet with a key question -- how to pay for it -- unanswered roughly two weeks before he’s due to present his plan, speculation about the lender’s financial strength has sent its shares on a rollercoaster ride.

The stock rose as much as 2% on Tuesday and was trading up 0.5% as of 1:03 p.m. local time.

While raising capital is one option under consideration, Credit Suisse executives would strongly prefer not to issue equity with the share price near record lows, Bloomberg News previously reported.

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