Credit Suisse is one of the largest banks in the world and is currently facing severe financial challenges. The bank is considering a variety of ways to raise capital such as selling shares and issuing new debt or even asking its shareholders to contribute additional funds. This may come as a shock to many, considering that Credit Suisse has been considered an extremely stable bank in recent times. But the current economic crisis has affected the bank and it is now in a difficult spot. It is unclear what Credit Suisse will do in order to raise capital. Whatever it decides, it’s likely to have a major influence on the banking sector in general.
What is Credit Suisse?
Credit Suisse is a Swiss banking company with it’s its headquarters in Zurich. It offers financial services to corporate, private, and institutional customers across the globe. The bank employs over 46,000 employees and is present in more than 50 countries.
Credit Suisse was founded in 1856 by Alfred Escher, a politician, and businessman. The bank started out as an unassuming operation with only three employees. It is now one of the biggest banks worldwide. As of 2015, Credit Suisse had a market capitalization of CHF 44.3 billion (approximately US$48.4 billion).
This bank was implicated in a number of major scandals in recent times. In 2014, the bank was punished with $2.6 billion for aiding American clients to avoid tax. It was also fined in 2015. was able to settle a fine of $885 million in order to pay off charges that it committed fraud to influence interest rates.
What is a capital raise?
Capital raises are the process of selling fresh shares in order to raise funds. It can be done via an initial public offer (IPO) or through the sale of shares of its stock to investors who are private. Credit Suisse may be considering an increase in its capital because of the recent decline in the price of its shares. The bank is under pressure because of the coronavirus epidemic as well as the decision of the Swiss National Bank of cutting interest rates.
What is the reason Credit Suisse considering a capital raise?
Credit Suisse is considering a capital raise to strengthen its financial standing in tough market conditions. Credit Suisse has recently been severely impacted by the global pandemic and its share price has dropped more than half since the beginning of the year 2020.
A capital raise could provide Credit Suisse with a much-needed increase in cash flow, which will help strengthen its balance account and enable it to operate in these difficult times. There are several possibilities that are available to Credit Suisse when it comes to capital raising, however, any decision will have the goal of minimizing the negative impact on shareholders.
It has taken measures to cut costs and save cash, such as suspending its dividend distribution and cutting jobs. However, these measures might have not been enough for the bank to withstand the storm. A capital raise might be the best option to make sure Credit Suisse remains a going business.
How would a capital increase affect the shareholders of Credit Suisse?
In the event that Credit Suisse was to raise capital by issuing shares, shareholders who are already in the company will be diminished and their share in the business would decrease. The value of each share will be likely to decrease due to the fact that the supply of shares available on the market grows. This is why any capital raise could negatively impact the shareholders of Credit Suisse.
What alternatives are there to raise capital in Credit Suisse?
Credit Suisse is in a difficult situation. It requires capital, but it will be difficult due to the current market conditions. Another option is to cut down on the size of the bank and concentrate on its core activities. It’s a challenging decision for the bank but it could be the only option to avoid capital raising.
Credit Suisse faces the possibility of having to raise capital, which could place additional stress on its already stretched balance sheet. This is an option last resort in the case of Credit Suisse, but it’s something investors need to consider as a possible danger.