Credit Suisse Group AG has turned to Middle Eastern sovereign wealth funds for a capital increase, news agencies reported.
The scandal-stricken Swiss bank has approached at least one Middle East sovereign wealth fund for a capital injection, Reuters reported Monday, citing an unnamed source.
Abu Dhabi and Saudi Arabia are considering putting money from their sovereign wealth funds into the investment bank of Credit Suisse and other companies, Bloomberg News reported. Such an investment could benefit from their low valuations, the report said.
Christian Meissner, head of Credit Suisse’s investment bank, will leave the bank once it announces a strategic overhaul on Oct. 27, a source familiar with the situation told Reuters.
The size and other details of a potential capital injection could not be ascertained.
A Credit Suisse spokesperson declined to comment, saying the bank would update its strategy review when it releases its third-quarter results.
The largest investor in Middle East sovereign wealth funds in Credit Suisse, the Qatar Investment Authority, declined to comment. Abu Dhabi’s Mubadala also declined to comment. The Abu Dhabi Investment Authority and Saudi Arabia’s Public Investment Fund did not immediately respond to requests for comment.
Shares of Credit Suisse rose more than 4.5 percent in New York afternoon trading after the news reports were released.
Credit Suisse, one of the largest banks in Europe, is trying to recover from a series of scandals, including the loss of more than $5 billion from the collapse of investment firm Archegos last year, when it also had to suspend client funds linked to the failed financier. greensill.
Analysts have said the company may need as much as 9 billion Swiss francs ($9 billion) as part of a reorganization, some of which may have to come from investors and others from asset sales.
It has already begun a sale process of its US asset management arm, Bloomberg News reported Monday, citing people familiar with the matter. The unit is expected to attract interest from private equity firms, the report said.
The capital increase approach indicates that asset sales alone may not be enough to cover the cost of an imminent overhaul that the beleaguered bank hopes will abolish 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 United States. in the run-up to the 2008 global financial crisis.
The New Jersey case was the largest of the remaining exposures to its old RMBS business, Credit Suisse said. Five other cases, all much smaller, are still pending.
In June, Credit Suisse was convicted of failing to prevent money laundering by a Bulgarian cocaine smuggling ring, while a court in Bermuda ruled that a former Georgian prime minister and his family had to pay damages of more than half a billion dollars from the local life insurance arm of Credit Suisse.
Credit Suisse chairman Axel Lehmann pledged Friday to reform the bank after a “terrible” 2021 in which it lost billions of dollars, the largest loss in its history.
“We are fully aware that we need to change, and we will clearly change,” he said.
Lehmann took over at the Swiss bank in January.
Earlier this month, the shares plunged a whopping 11.5 percent, hitting a record low of $3.64.
At the same time, credit default swaps – a type of investment that serves as insurance against a company’s default – soared to unprecedented heights, sparking rumors that the bank was on the brink of collapse.