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From Swiss bank loans to debt securities offerings, Credit Suisse’s plan to boost liquidity


Troubled Swiss bank Credit Suisse gained some market confidence Thursday after taking bold steps to pre-emptively strengthen its liquidity problems. Seeing it as a lifeline, investors began to park their money again in Credit Suisse, which corrected dramatically earlier this week. The Swiss-based financial services company’s rescue plan is a mix of loans from the Swiss National Bank and public debt offers.

In a statement on Thursday, Credit Suisse said it is exercising its option to borrow up to CHF 50 billion from the Swiss National Bank (SNB) under a Covered Loan Facility and a short-term liquidity facility, which are fully backed by high-quality assets.

The Swiss bank also announced offers from Credit Suisse International to buy back certain senior debt securities from OpCo for cash of up to about CHF 3 billion.

The company announced its intention to access the SNB’s Covered Loan Facility and a short-term liquidity facility totaling approximately CHF 50 billion.

This additional support from SNB is likely to support Credit Suisse’s core businesses and customers as the company takes the necessary steps to create a simpler and more focused bank built around customer needs.

Further, Credit Suisse said, it is making an all-cash offer for ten US dollar-denominated senior debt securities for an aggregate amount of up to $2.5 billion.

The company also announced a separate cash offer for four euro-denominated senior debt securities for an aggregate amount of up to EUR 500 million.

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Both tender offers are subject to different conditions as set out in the respective offer memorandums.

The public offers expire on March 22, 2023.

These takeover bids are in line with Credit Suisse’s proactive approach to manage overall liability composition and optimize interest expense, and allow the company to take advantage of current trading levels to repurchase debt at attractive prices. Company.

CEO Ulrich Koerner said: “These actions demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our customers and other stakeholders. We thank the SNB and FINMA as we execute our strategic transformation. My team and I are committed to moving forward quickly to create a simpler and more focused bank built around customer needs.”

Credit Suisse is one of the world’s systemically important banks. At the end of 2022, the company had a CET1 ratio of 14.1% and an average liquidity coverage ratio1 (LCR) of 144%. The liquidity ratio has improved to approximately 150% as of March 14, 2023.

It said the use of the CHF 39 billion Covered Loan Facility will further strengthen the LCR with immediate effect.

According to the statement, Credit Suisse is conservatively positioned against interest rate risk. The volume of fixed income securities with a maturity is not material compared to the total HQLA (high-quality liquid assets) portfolio and is also fully hedged against interest rate movements.

In addition, the loan portfolio is nearly 90% highly collateralised, with over 60% in Switzerland and an average loan loss ratio provision of 8 basis points at Wealth Management and the Swiss Bank.

In line with the announcement of the Group’s strategy on 27 October 2022, Credit Suisse has made significant progress towards this transformation and has an accelerated schedule to lay the groundwork for the new Credit Suisse.

The company’s strategy includes decisive action to radically restructure the Investment Bank, including the substantial exit from the Securitized Products Group, where the bank has already achieved more than 70% of its target asset reduction.

The Swiss bank has also accelerated its cost transformation and is well on track to deliver ~2.5 billion CHF in cost base reductions by 2025, including ~1.2 billion CHF in 2023.

Credit Suisse’s share price traded more than 21% to CHF 2.06 at the time of writing. The stock is up more than 32% over the course of the day.

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Joanna Swanson

Joanna Swanson is Europe correspondent at the Thomson Reuters Foundation based in Brussels covering politics, culture, business, climate change, society, economies and inclusive tech. With specific focus in breaking news, she has covered some of the world's most significant stories.