* Bank to raise about 4 bln Swiss francs in rights offering
* Ditches planned listing of Swiss banking business
* First-quarter net profit beats analyst forecasts
* Shares hit highest since March 3
(Adds comments by CEO, investor and analysts, share price)
By Joshua Franklin
ZURICH, April 26 Credit Suisse has
ditched plans to raise money by listing part of its Swiss
business and will instead sell new shares worth about 4 billion
Swiss francs ($4 billion) to get its financial strength back on
a par with rivals.
Switzerland's second-biggest bank, which is recovering from
back-to-back annual losses as it restructures under Chief
Executive Tidjane Thiam, said the decision should remove any
lingering concerns about its capital strength.
"It's the right move, even if I would have preferred it not
to be necessary," said Thomas Braun, fund manager at Classic
Fund Management, a top 30 Credit Suisse shareholder.
The 4 billion franc rights issue follows a 6 billion franc
cash call in late 2015 and asset sales that raised about 1
billion francs in capital. It will be the last leg of Credit
Suisse's plans to raise the 9-11 billion francs Thiam said it
needed when he announced his revamp in October 2015.
"Is there something on top of that? The short answer is
'no'," Thiam, who became CEO in July 2015, told reporters.
The cash call follows similar capital increases by German
rival Deutsche Bank and Italy's UniCredit
this year and should benefit from a rally in bank stocks after
polls showed French far-right candidate Marine Le Pen would lose
a presidential run-off on May 7.
Reuters reported last month that Credit Suisse was
considering a share sale rather than an initial public offering
(IPO) of its Swiss banking division and was set to make a
decision in April.
Scrapping the IPO means Credit Suisse will not have to
sacrifice some of the profits from one of its most lucrative
divisions and will avoid the operational complexities of having
a separate listed entity within a global bank.
"I'm glad they're not selling the Swiss bank as that would
have weakened the overall business and raising equity is simpler
and cleaner," said David Hussey, fund manager at top 60 Credit
Suisse investor Manulife Asset Management.
Credit Suisse has lost 5.65 billion francs since 2015 as
Thiam focuses on expanding its wealth management business while
shrinking its investment bank, a shift the Swiss bank expects
will lead to more than 10,000 job losses.
The bank's management is also fighting an investor protest
over high executive pay that is set to come to a head at its
annual meeting on Friday while the Netherlands is leading an
investigation into alleged tax evasion and money laundering
involving the bank.
Still, clarity on its plans for raising capital, as well as
better than expected first-quarter numbers, pushed shares in
Credit Suisse up as much as 3.7 percent to their highest since
March 3. The shares were trading 1.9 percent higher at 1135 GMT.
"This set of numbers and, much more importantly, the removal
of capital uncertainty make the shares ready for a relief
rally," wrote Kepler Cheuvreux analyst Peter Casanova, who rates
Credit Suisse's stock "buy".
The bank reported net profit of 596 million francs for the
first three months of 2017, its highest quarterly profit since
Thiam launched his sweeping restructuring and ahead of even the
highest estimate in a Reuters poll of analysts.
"Wealth management as well as investment banking trends give
us reason to be optimistic," said Andreas Brun, banking analyst
at Mirabaud Securities LLP.
However, Credit Suisse cautioned that the outcome for the
second quarter "will be dependent on political developments that
are hard to predict at this stage".
LAST CAPITAL INCREASE?
Credit Suisse expects to have a common equity Tier 1 (CET1)
ratio, a closely watched measure of balance sheet strength, of
approximately 13.4 percent and a tier 1 leverage ratio of about
5.1 percent following the 4 billion franc capital increase.
By comparison, Deutsche Bank expects to achieve a CET1 ratio
of 14 percent through its cash call and Swiss rival UBS
is just shy of 14 percent.
While some analysts reckoned the debate about the bank's
capital position had finally been put to rest others remained
concerned it might not be the last cash call.
"How can a bank as big as CS be so volatile in terms of its
earnings and unpredictable as to how much capital it needs? They
are being forced to adjust quarter by quarter," said Chirantan
Barua, an analyst with Bernstein. "This may not be the last
The bank will hold an extraordinary general meeting on May
18 for shareholders to vote on the capital increase.
Thiam said the full benefits of his restructuring would feed
through to investors after next year.
"Nobody is more eager than me to get to 2018 because then we
start seeing in 2019 what this bank can deliver."
($1 = 0.9919 Swiss francs)
(Additional reporting by Oliver Hirt and Angelika Gruber in
Zurich and Danilo Masoni in Milan; writing by John O'Donnell and
Joshua Franklin; editing by Keith Weir and David Clarke)