There was no shortage of "bad news" at Credit Suisse in the past year. In recent months, the major domestic bank has been plunged into a veritable crisis with high losses. For Q4 2022 alone, CEO Ulrich Körner expects a pre-tax loss of up to CHF 1.5 bn. The share price has developed correspondingly negatively. Barely four weeks before the end of the 2022 stock market year, Credit Suisse is carrying the red lantern in the SMI with a share price discount of almost two-thirds. Indeed, the financial stock will hardly be able to get rid of the inglorious title of "bottom of the league". At the same time, the main partner of the soccer team recently provided positive news again. Investors were particularly relieved by a statement from Axel Lehmann, Chairman of the Board of Directors. In an interview with "Bloomberg TV", he was able to give a cautious all-clear regarding the outflow of funds.
Lehmann explained that the withdrawal of client funds had practically come to a standstill. To him, clients have even promised new funds, he said. "In some cases, we are already seeing that," the manager said. The enormous uncertainty about the state of Credit Suisse had recently caused a veritable exodus of capital. Between the beginning of October and mid-November alone, a net of CHF 84 billion - 6% of total client assets - had flowed out. Axel Lehmann is convinced that the company will regain trust. To this end, the company would actively approach its customers. At the same time, he reaffirmed the restructuring course in the interview. Savings efforts are even to be stepped up. "By the end of next year, we will save more than 1.2 billion," Lehmann said. As part of the restructuring plans unveiled at the end of October, Credit Suisse had set an interim target of reducing costs by CHF 1.2 billion by 2023. While the group will not be profitable next year, the business is "definitely stable," according to the board chairman."
CS shares reacted to the interview with significant gains last Friday. However, the bank stock had hit an all-time low of CHF 2.65 the day before. However, at the start of the new trading week, the bank again led the SMI with a gain of almost 3%. A report in the Wall Street Journal provided an additional boost. According to the well-known publication, Saudi Arabia's Crown Prince Mohammed bin Salman is said to be considering an investment in Credit Suisse's new investment bank, Credit Suisse First Boston (CSFB). The paper, citing people familiar with the matter, also reported interest on the part of an American private equity firm investing a similar amount in CSFB. This is yet to be the case. Credit Suisse's priority is to get the current capital increase through subscription rights into the bag. The exercise period for the transaction, expected to raise CHF 2.24 billion gross, ends on December 8. Credit Suisse is raising a further CHF 1.8 billion through a private placement with qualified investors, including Saudi National Bank.
The new Softcallable Reverse Convertible offers an interesting alternative to the direct purchase of shares. Irrespective of the further performance of Credit Suisse's share price, investors receive a quarterly coupon payment of 11% p.a.. The strike price at a low 55% of the initial fixing is decisive for the redemption. As long as the underlying quotes above this level at maturity, the issuer repays the nominal value in full. Otherwise, the Credit Suisse share will be delivered at the strike price. In this case, an entry would therefore be at a discount of 45% compared with the current price of the underlying. In short, an attractive return is possible with the Reverse Convertible, even in the event of further bad news. The low strike ensures that the opportunity outlined only comes into danger in the event of a correction of more than 45%. Of course, even such a setback cannot be ruled out, given the explosive situation of the major bank. Please also note the soft callable feature. It makes this issue's early termination and redemption - after six months at the earliest - possible.
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