Credit Suisse bank (NYSE:CS) is raising $2 billion U.S. from investors and cutting the hedge fund unit at the center of the Archegos Capital Management losses.
Credit Suisse, which has exited about 97% of its exposure to Archegos, expects a related $654 million U.S. loss in the second quarter of this year, taking its total hit from the debacle to about $5.5 billion U.S.
In response, the bank is cutting about a third of its exposure in its prime business catering to hedge fund clients, while strengthening capital with the sale of notes converting into shares.
Credit Suisse was hit hard by the collapse of Archegos, the family office of U.S. investor Bill Hwang. The Archegos implosion came just weeks after Credit Suisse found itself at the center of the Greensill Capital scandal, when it was forced to suspend investment funds.
Credit Suisse says it has seen a year’s worth of profits wiped out. As a result, the bank has suspended its share buybacks and cut its dividend. Credit Suisse’s stock price fell as much as 6.9% in Zurich trading, bringing this year’s decline to 23%.
The bank plans to reduce risk at the investment bank, including cutting about $35 billion U.S. of leverage exposure at the prime brokerage unit that services hedge fund clients.
The bank said the convertible notes were sold to core shareholders, institutional investors and high net worth individuals and will help bring the bank’s CET1 ratio — a key metric for capital — nearer its target of 13%. That number had dropped to 12.2% at the end of the first quarter.