Capital increase was successful
4 billion nest egg for Credit Suisse
Credit Suisse has completed the capital increase, the shares are increasing. Nevertheless, there is still a lot to be done before the major conversion is complete. Large leaps in the stock market are therefore not to be expected.
Credit Suisse’s capital increase was successful.
It is a first milestone for Credit Suisse on the long road to a profitable future: almost all new shares in CS have found buyers. The capital increase has thus been successful and the bank has fresh capital of four billion francs. However, the subscription rate of 98.2 percent does not mean that all existing shareholders took part with great enthusiasm. On the contrary. “There was brisk trading in the subscription rights,” explains Andreas Venditti (50), an analyst at Bank Vontobel: “Especially for hedge funds that have been betting on falling prices at CS, the calculation has worked out.”
What played into the hands of the so-called short sellers: All the rumors about the bank’s catastrophic difficulties that were circulating in the fall. When the bank then communicated the outflow of customer funds, the share price slipped again – a treat for the hedge funds. They were able to purchase shares and subscription rights from frustrated old shareholders and stock up on CS shares at low cost.
Nevertheless, the share will not take off
The new CS shares are wanted on the stock exchange. The price has moved significantly away from the all-time low of 2.65 francs, has climbed back above the three franc mark and closes with a plus of 6.76 percent. However, the share will not take off because of this. Venditti sees the price target for CS at 3.50 francs. “In order to stop the outflow of customer funds, the bank has to accommodate wealthy customers in terms of fees or interest rates,” he says. The problem: “Once the fees have been reduced, it is extremely difficult to raise them again later.” That is one of the experiences that UBS had to make after the financial crisis.
It is not only money that flows away that reduces the bank’s earnings base, but also lower fees. It is quite possible that CS will have to continue to tighten the cost screw during the planned conversion. After all, thanks to the capital increase, the bank currently has enough leeway in terms of capital and liquidity to process all the many steps on the way to the new Credit Suisse.