Credit Suisse Group AG, which has earmarked its Swiss unit for a partial listing, could instead raise capital after its share price rebounded from a record low, according to UBS Group AG.
Credit Suisseâ€™s shares have risen more than 50 percent since their low of 9.755 francs last July, â€œmaking a capital increase a viable alternative to a rather complex and costly IPO of the Swiss unit,â€ UBS analysts led by Daniele Brupbacher wrote in a client note. He said investors would be more willing to have their shareholdings diluted by the sale of new stock now that the price is higher.
The initial public offering of the unit housing the groupâ€™s Swiss-focused business is a major plank in Credit Suisse Chief Executive Officer Tidjane Thiamâ€™s efforts to bulk up capital levels. The former insurance executive is navigating Switzerlandâ€™s second-biggest lender through an overhaul to refocus the group more on wealth management and less on capital-intensive investment banking.
Credit Suisse has said it plans to raise 2 billion francs ($2 billion) to 4 billion francs in an IPO of 20 percent to 30 percent of the Swiss unit before the end of 2017.
Brupbacher said that while he still expects the group to sell off 25 percent of this unit, the IPO would have several drawbacks. He warned that minority shareholders might be concerned Credit Suisse may have a conflict of interest with its other businesses.
An alternative, he argued, could be a capital increase in an accelerated bookbuild to increase the buffer against losses by 10 percent, which he said wouldnâ€™t require a prospectus.
Credit Suisse, which is set to report fourth-quarter results on Feb. 14, fell 0.9 percent in Zurich trading on Monday to close at 14.95 francs, giving the group a market capitalization of 31.2 billion francs.
Speculation that Credit Suisse would call off the Swiss unit IPO has circulated in the wake of comments last month by David Herro of Harris Associates, which owns just under 10 percent of the group. Herro said Credit Suisse may not have to continue with the share offering because concerns about its capital ratio had eased after it agreed in December to pay more than $5 billion to settle a U.S. investigation into its sale of toxic mortgage debt.
Since those remarks, Credit Suisseâ€™s Thiam has insisted the Swiss unit IPO is still in the cards, telling Bloomberg at the World Economic Forum in Davos, Switzerland, last month that the lender is â€œgoing full speed to implement it.â€
Herro, though, remains unconvinced.
â€œThey donâ€™t need capital and Credit Suisse appear undervalued,â€ the Harris Associates chief said in e-mailed comments Monday. â€œSo why would they issue equity?â€