Reports suggest that investment bank Credit Suisse is exploring the possibility of a CS First Boston IPO. The bank is the majority shareholder in the investment bank and according to Reuters is open to the possibility of an IPO.
Chief Executive Ulrich Koerner said that an unnamed investment company has already committed to back the development and promised $500 million, as the bank restructures for the future.
The CS First Boston IPO
The announcement follows a strategic review conducted by the financial services firm.
The Swiss bank will be rebranding its capital markets and advisory business division as CS First Boston. The company also revealed that the Saudi National Bank (SNB) is ready to invest in a CS First Boston IPO. The SNB has a 9.9% stake in the Credit Suisse Group.
Credit Suisse board member Michael Klein will step down and become chief executive of the new CS First Boston entity. The firm has not revealed any other details pertaining to the IPO for CS First Boston spinoff. The firm will be headquartered in New York.
Credit Suisse Restructuring
As the bank weathers a hellish bear market, it has announced plans to raise a fresh round of capital to the tune of $4 billion. It will also initiate a series of job cuts and plans to layoff nearly 9,000 workers over a period of three years.
Other changes include the transfer of the securitized products group to a consortium of Apollo Global Management and Pacific Investment Management Co, according to The Wall Street Journal.
The bank stated that it will focus on its core business — managing the money and assets of the rich — and expects its cost base to fall by $2.5 billion in the next two years. The Credit Suisse restructuring is expected to cost around $2.9 billion over the next years, which comes to around 15% of its total costs.
The bank is focused on revamping its businesses after numerous scandals saddled it with large legal bills and a client collapse in 2021 set back its revenues.
Koerner’s Plans for the Future
The strategic changes were proposed after the bank reported its fourth consecutive loss. After Credit Suisse announced its results, its shares plunged by around 12%.
Koerner took charge in July after former CEO Thomas Gottstein stepped down amidst massive losses and expectations of a revamp. Under his guidance the bank is expected to push through with the strategic overhaul that will make it profitable and efficient.
The bank has faced tremendous pressure from its investors due to its underperformance. Koerner told CNBC that the changes represent the bank’s “transformation into a new Credit Suisse.” Experts say that the bank saw lesser revenues as a result of lower commissions and less trading activity.
Koerner is optimistic about the changes in the pipeline, telling CNBC that the bank started by addressing client needs and that is what they plan to do in the future as well. He asserted that the new direction will make the bank “much more stable, will be sustainably profitable, much simpler in how it is set up.”
Axel P Lehmann, Chairman of the Board of Directors of Credit Suisse said that Credit Suisse has built a powerful franchise in the last 166 years but recently became unfocused, which affected its businesses. The new model is set to create value for shareholders and create sustainable returns. Koerner echoed his sentiments and maintained that risk management will be at the core of Credit Suisse restructuring.
Analysts predict that the Credit Suisse restructuring plans might face some challenges as high inflation, an unstable geological climate, and a bearish market cast a dark shadow over the future.
