Bloomberg News Credit SuisseBoard Backs CEO in Feud With Swiss Central Bank By Christine Harper and Liam Vaughan on June 22, 2012 Credit Suisse Group AG (CSGN)âs board threw its support behind Chief Executive Officer Brady Dougan a week after the Swiss National Bank said the company needs to accelerate efforts to raise capital. âThe board is comfortable with the progress that has been made toward meeting the Basel 3 capital requirements,â the directors said in a statement today, adding that theyâre âconfidentâ that managementâs plans will ensure the Zurich- based bank exceeds capital requirements. Credit Suisse, the second-biggest Swiss bank by assets, fell as much as 11 percent on June 14, hitting the lowest level since 1992, when the Swiss central bank surprised the company by urging it to boost capital âduring the current year.â Dougan, a 52-year-old U.S. citizen whoâs been CEO since May 2007, has contended he doesnât plan to sell stock to raise capital. âTheyâre going into battle with the Swiss National Bank because they feel unfairly treated,â said Christopher Wheeler, a London-based analyst at Mediobanca SpA. âThey have a glide path to increasing capital based on retaining earnings but the SNB is quite aggressive in wanting them to move earlier.â The boardâs statement, issued after a regularly scheduled meeting, may help quell speculation that Douganâs job was at risk. Swiss newspapers including Tages-Anzeiger and Der Sonntag, citing unidentified sources, reported last month that the board may be interested in finding a new CEO. âPressure is building and if they do have to go to the market to raise equity capital it could have a big impact on the CEOâs position,â Wheeler said. âVery Confidentâ The board includes representatives from the bankâs two biggest shareholders, Olayan Group of Saudi Arabia and sovereign-wealth fund Qatar Holding LLC, which participated in Credit Suisseâs 10 billion-franc ($10.5 billion) capital increase in October 2008. Koor Industries Ltd. (KOR), a Tel Aviv-based company that also helped the lender raise capital, said in an e- mail this week that itâs âvery confident in the bankâs management and performance.â The Swiss government, the SNB and the market regulator are stepping up efforts to make the countryâs biggest banks prepared in the event that the European debt crisis worsens. The Swiss National Bank on June 14 singled out Credit Suisse as needing a bigger capital boost than UBS AG, and put a time-frame on its recommendation. New Stock The lender has no plans to sell shares, Dougan told SonntagsZeitung in an interview published on June 17. Some employees, disagreeing with Dougan, favor selling new stock even at current levels to put an end to questions about the firmâs capital strength, four senior managers said in interviews this week. Credit Suisseâs common equity and contingent convertible bonds, known as CoCos, amounted to about 5.9 percent of risk- weighted assets under Basel 3 at the end of March, the central bank said. That ratio stood at 7.5 percent for UBS, it said. Had the SNB included CoCos to be issued next year in its calculations, Credit Suisseâs capital ratio would have been 7.9 percent, Dougan told SonntagsZeitung. CoCos convert into shares when the bankâs capital ratio falls below a predefined level. To contact the reporters on this story: Christine Harper in New York at charper@bloomberg.net Liam Vaughan in London at lvaughan6@bloomberg.net. To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net. Edward Evans at eevans3@bloomberg.net.
Credit Suisse guides Q2 profit Investor's Business DailyInvestor's Business Daily The European bank giant said it expects a Q2 profit across all divisions when it reports earnings July 26. Credit Suisse (CS) was trying to ease investor worries after an earlier warning on capital levels by the Swiss National Bank and a long-term debt rating cut by Moody's. Banks will likely post declining investment banking revenue for Q2, hampered by eurozone crises. Shares rose 5.2% Parsed Earnings this Summer will help guide multiples going forward. Price action has shown lower prices ahead UNLESS earnings are strong enough to buoy NEW buyers. Shares are turning over right now. This is a longterm play not a shorterm play. On the order oy years not weeks/months.
What Does the Libor Scandal Mean for Swiss Banks? 02 Jul 2012 EDT - CNBC.com As the Libor fixing scandal embroils the UK banking sector, the question is: which other banks will be slapped with fines? In Switzerland, UBS [ UBS 10.69 +0.10 (+0.94%) ] and Credit Suisse [ CS 17.47 +0.17 (+0.98%) ] are also being probed by several international regulators about their role in illegal Libor fixing. This was clearly flagged by both banks in their annual reports, while the focus over the past few months has undoubtedly been on UBS. A European banking analyst, who did not want to be named, told CNBC that while he is concerned about the investigationâs impact on Swiss banks UBS and Credit Suisse, this is largely because it is an industry-wide and systemic issue, not because either of the banks is believed to have been the worst offender. He adds banks were engaged in the libor fixing activities to different degrees, meaning not every bank will see a heavy fine similar to the one given to Barclays [ BARC-GB 162.15 -1.35 (-0.83%) ]. He says at this point it is too difficult to say how big the fines will be for every institution but warns that potential class action lawsuits and litigation make the final cost for banks very uncertain. Credit Suisse meanwhile has been associated a lot less with the probe than its Swiss rival, and analysts expect its role in the libor fixing scandal to have been very limited. The general consensus is that the bank wonât be fined or that a fine will be very low. In its 2011 annual report Credit Suisse wrote: âCredit Suisse is not a panel bank for Yen Libor, Yen Tibor or Euroyen Tibor. Credit Suisse is cooperating fully with these investigations.â
Credit Suisse (NYSE:CS) and its Swiss peer UBS A.G. (NYSE:UBS) are said by Morgan Stanley to possibly be liable for penalties amounting to 446 million francs ($454.73 million) and 827 million francs, respectively. However, the former (Credit Suisse) does not believe that it has âany material issuesâ in the âmatterâ of the manipulation of the Libor rate. Hot potato and who is the bag holder begins in earnest. CS may take the high road here which will only help its cause going forward although it smacks of "best of the worst" for sure.
Will Switzerland Fall Prey to the Troubles of the Eurozone? By Molly McCluskey CSCredit Suiss Neutrality put to the test The country's decision in 2001 not to join the eurozone, when its neighboring countries to all sides were leaping on board, was clearly a good one for the neutral country. Granted, the cost of living is high, a Starbucks latte and muffin that in the States would have cost me $6 cost me nearly 10 francs in Bern. The unemployment rate is low; while other countries were watching the ranks of their unemployed rise in number, Switzerland's declined steadily from above 4% in January 2011 to 2.8% in July 2011. It's since risen to 3.4%, only to drop back down to 3%. In the global environment of bank disasters, from the MF Global collapse to the LIBOR rate manipulation, from the fallout from subprime mortgages to laundering for terrorist groups, Switzerland's safe haven for tax evaders seems almost charming. But consider Switzerland's neighbors: Italy, with an economy that's shrunk 2.4% this year; France, with an economy that its president called "flatlined"; and of course, Germany. Switzerland is the sole holdout from the eurozone in Western Europe, surrounded as far as the eye can see. In this case, a sort of reverse of the old adage is true: If they don't join you, beat 'em. But another adage remains true: Buy low, sell high. Not all banks are a bad investment right now; in fact, some are ideal investments right now
Wed, Jul 18, 2012, 2:47pm EDT - GENEVA (AP) -- Credit Suisse is to strengthen its capital buffers against future financial crises by as much as 15.3 billion Swiss francs ($15.6 billion), Switzerland's second-largest bank announced Wednesday. The capital increase is seen as a direct response to criticism from the Swiss central bank, which earlier this year warned that Credit Suisse Group's capital reserves were below international norms for withstanding a financial crisis. The bank had rejected the central bank's findings, but lost market value when unconvinced investors sold its shares. Wednesday's news cheered traders, who sent the bank's shares higher. They closed up 4.49 percent, at 17.91 francs ($18.30), on the Zurich exchange. Until Wednesday, the bank's shares had fallen 22 percent this year. Credit Suisse said it would raise 8.7 billion francs immediately. Of that, some 3.8 billion francs will come from issuing convertible bonds underwritten by investors from Qatar, Saudi Arabia, Norway and Singapore. The rest of the capital would be raised by other measures such as divestments, including sales of real estate, exchanging hybrid capital notes, and paying bonuses in shares. Chief Executive Brady Dougan said the measures "should completely put any capital questions to rest" by almost doubling the bank's capital ratio compared with the first quarter. The Zurich-based bank made the announcement as it posted its second quarter earnings â net profit increased to 788 million francs ($806 million) from 768 million francs in the same quarter of 2011. The bank is trying to turn round its global image after weathering crackdowns in the U.S. and in Europe on tax-evading citizens suspected of hoarding funds in Swiss banks. Dougan had successfully led the bank through the 2008-2009 global financial crisis without resorting to a government bailout like UBS AG, Switzerland's largest bank. In a statement Wednesday the Swiss National Bank welcomed the plan to raise capital, saying that "in an environment that remains particularly challenging for the international banking system, these measures substantially increase the resilience of Credit Suisse Group." Credit Suisse also said it plans to save another 1 billion francs by the end of 2013, after cutting 2 billion francs in costs by mid-year 2012 and announcing plans last year to shed 3,500 jobs. The bank now has 48,200 employees.
Bargains Among Battered European Bank Stocks? Oakmark International's David Herro Makes His Case July 23, 2012 | includes: BNPQY.PK, CS, EUFN, LYG, SAN, UBS By Carla Fried You could excuse David Herro for being frustrated and blue right about now given that his $8.4 billion Oakmark International fund lost 10.4% in the second quarter. Big investments in troubled European banks including Credit Suisse (CS), BNP Paribas (BNPQY.PK) and Banco Santander (SAN) were a serious drag. But Herro, who has serious cred in international investing circles isn't blinking. A telling excerpt from commentary Herro wrote to accompany the just-released second quarter shareholder letter: "The strong sell-off in stocks seems to be way overdone. Note that the fundamental value of any business is determined by the present value of ALL future cash flow streams. However, "Mr. Market" frequently prices businesses based on short-term macro and political fears. Our task is to incorporate the impact, IF ANY, these fears have on the actual ability of companies to generate current and future cash flow streams, as it is these streams, not political uncertainty that is the key determinant of business value. In most cases, this key number - the present value of all cash flow streams - is at worst mildly impacted by market volatility and thus we are provided with a buying opportunity. Specifically, given that our investment time horizon is one of an investor and NOT a trader, we can take advantage of a weak market environment by investing in what we believe are high-quality businesses at very low prices. Thus, as mentioned before, it becomes a very fertile environment for value investors." Why listen to him? Well, Morningstar, the mutual fund research firm, named him the Foreign Equity Manager of the Decade a few years ago. More recently, the fund's three year annualized gain of 10.3% through mid July is nearly four percentage points ahead of the MSCI EAFE index, the standard benchmark for international investors. Herro, if you haven't already figured it out, is a card-carrying value investor. So while many investors shudder over Europe's woes, he's willing to invest in-and stay invested in- quality businesses when they are, in his opinion, unjustly battered. Herro's bottoms-up strategy has led him to an overweight in the troubled overseas financial sector. According to Morningstar, Oakmark International has 27% of its stock portfolio riding on financial service companies, compared to 17% for similar funds. And Herro is clearly betting that some Euro-based banks getting smacked silly right now are compelling long-term investments. His portfolio has sizable stakes in Credit Suisse Group, BNP Paribas, Lloyd's Banking Group (LYG), Spain's Banco Santander and Italian bank Intesa Sanpaulo. So what's Herro smoking? Well, in part he figures the banks are guilty by association. The standard non-Herro riff is: They are banks. Worse yet, banks based in Europe. So they must be close to implosion. Herro has a more nuanced take. To understand Herro's interest in the sector, consider Credit Suisse, one of Switzerland's largest banks. The Swiss central bank advised Credit Suisse, and UBS, on June 14th to increase their capital base to build a bigger buffer if the Euro begins to crumble. (Switzerland is not a part of the Euro, but will be impacted it there are any exits.) Credit Suisse said its capital base is just fine, thank you. Still, there's been little good news in its numbers lately. Earnings have taken a serious hit. And Return on Equity has cratered as well. That's caused plenty of pain for shareholders for the past year, and makes for an ugly stock chart. Herro thinks investors have misunderstood Credit Suisse. As he told Bloomberg recently, the company is being beaten up as if it were a standard issue retail bank. But it's really centered on being an investment bank and a wealth management-driven operation with an emphasis on ultra high net worth clients. That business added more than $8 billion (US) in new assets in the first quarter of the year. And Herro clearly disagrees with the Swiss National Bank's capital request, which he deemed as "odd" in his second quarter letter. Herro went on to explain himself: "We already know that the Basel 3 [capital] requirements for Swiss financial institutions are some of the most stringent in the world, another example of Swiss governmental agencies' extreme conservatism. We take capital strength and solvency very seriously, as it helps protect downside risk when investing. With little exposure to sovereign debt, excellent liquidity and a strong balance sheet that is growing stronger, Credit Suisse's financial strength satisfies our investment criteria." Nonetheless, in mid-July Credit Suisse announced plans to bolster its capital, in a move no doubt designed to address continued pressure on the stock price since the SNB voiced its concerns. But Herro is the sort of investor who will calmly wait years, not merely months, for his thesis to play out. With patience, there's the potential for a nice fat 4.5% dividend yield to collect. The key word here is "potential," however. If Credit Suisse does appease its central bank with more capital, the money could come from would-be dividend payments. If that happens, Credit Suisse will need all the patience from investors it can get.