Credit Suisse Surprises With $2 Billion Capital Raise, Still Has Exposure To Archegos In "Three Distinct Positions"

The CEO did disclose that the bank has "good visibility for a large portion of the remaining positions" and that there are "three more distinct positions which we will work through in the next months and quarters. We are not planning to do any form of step-in. We are very clearly focused on getting the cashback to our investors.”

It was unclear which stocks those three positions represent.

For CEO Gottstein, who is battling to rescue his short tenure as a chief executive officer after Credit Suisse was hit harder than any other competitor by the collapse of Archegos just weeks after the bank found itself at the center of the Greensill scandal too, the double whammy wiped out a year of profit and left Gottstein fighting to demonstrate to incoming Chairman Antonio Horta-Osorio that he’s of the right mettle to carry the bank through the volatility which has left investors nursing losses and questioning its strategy and controls.

Yet as Gottstein stays, most of his lieutenants are out: gone are investment banking head Brian Chin and Chief Risk Officer Lara Warner, along with a raft of other senior executives including equities head Paul Galietto and the co-heads of the prime brokerage business. Asset management head Eric Varvel is also being replaced in that role by ex-UBS Group AG veteran Ulrich Koerner.

As part of his hope to preserve his job, the CEO plans to reduce risk at the investment bank, including cutting about $35 billion of leverage exposure at the prime brokerage unit -- which services its hedge fund clients, Gottstein said in an interview with Bloomberg Television. That’s about a third of its total exposure, although it was unclear how many clients the move will affect and whether the hedge funds will be forced to close out positions.

Here are the full highlights of Gottstein's interview with Bloomberg's Francine Lacqua.

  • Credit Suisse Group AG’s placement of mandatory convertible notes raised almost $2 billion and has helped “take the capital discussion off the table,”
  • “We have conditional capital; that’s the best way for us to raise the equity with a short 6-month maturity. It was important for us to get to get to 13% CET1 ratio which on a pro-forma basis we now have.”
  • “With Archegos we are down to the last 3%; We have exited the positions to a large extent.”
  • “We’ve taken action in our risk organization, we have taken management changes so we have done quite a lot, still some work to do in the second and third quarter but we have taken a lot of measures.”
  • In prime brokerage business, Gottstein says “our plan is to reduce leverage exposure by $35 billion by the end of the second quarter.”
  • With Greensill, “We have brought back $5.4 billion in terms of cash out of the original $10 billion, we have good visibility for a large portion of the remaining positions. There are 3 more distinct positions which we will work through in the next months and quarters. We are not planning to do any form of step-in. We are very clearly focused on getting the cash back to our investors.”
  • “If you look at our provision for credit losses it has been a very strong 10-11 years so I don’t think we have a DNA problem in terms of risk.”
  • “We’ve taken action in our risk organization we have taken management changes so we have done quite a lot, still some work to do in the second and third quarter but we have taken a lot of measures.”
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