Credit Suisse on Thursday announced an expansive plan to revamp its operations, including drastically shrinking its investment bank and raising $4 billion in capital from Saudi investors and others, as the embattled Swiss bank seeks to move on from years of losses and scandals around the world.
The announcement came as the firm reported that it had lost 342 million Swiss francs, or $346 million, in the third quarter, a sharp swing from a $1 billion profit a year ago. And that excluded taxes and hefty costs related to the restructuring: Including those charges, the bank’s third-quarter loss was just over 4 billion Swiss francs.
Thursday’s disclosure marks the latest effort by Credit Suisse — a linchpin of the Swiss banking industry for 166 years — to turn around its fortunes. For much of the past decade, the bank has stumbled from crisis to crisis, including billions of dollars in trading losses, costly legal settlements and a revolving door of executive departures.
Fears about undiscovered financial land mines in the firm’s finances have weighed heavily on the bank. Its stock has fallen 45 percent so far this year, pulled down in part by unfounded rumors about its solvency. Credit Suisse’s stock fell more than 10 percent in early trading in Switzerland.
Thursday’s revamp caps months of promises by Credit Suisse’s management team — including its chief executive of six months, Ulrich Körner — to devise a strategy to make itself smaller and more financially prudent.
“This is a historic moment for Credit Suisse,” Mr. Körner said in a statement. “We are radically restructuring the investment bank to help create a new bank that is simpler, more stable and with a more focused business model built around client needs.”
That means a greater focus on its core private wealth unit, which represents more than a third of its revenue and manages $644 billion in assets, and keeping only the operations that directly support this business.
Credit Suisse plans to spin out its mergers and capital advisory business into a new firm, CS First Boston, that revives the name of the American investment bank it bought years ago to compete with Wall Street rivals like Goldman Sachs.
That new firm will be led by Michael S. Klein, a veteran deal maker and Credit Suisse board member who helped lead the strategic review. It will seek to raise capital from outside investors.
Credit Suisse also plans to put some of its riskiest assets and nonessential businesses, including what’s left of its hedge fund lending unit and its operations in regions like Latin America, into a new division — informally known in financial circles as a “bad bank” — to eventually be sold or wound down.
The bank reached a preliminary deal to sell a majority of its securitized products group, a profitable but risky trading business that requires significant capital, to investors led by Apollo Global Management and PIMCO. If a final agreement is reached, the transaction is expected to close by next summer.
Credit Suisse said it would cut its costs by some $2.5 billion through measures including layoffs that will reduce its employee count by 9,000 positions. It employed about 52,000 people at the end of September.
And it plans to raise about $4 billion by selling new shares to investors to shore up its capital reserves, including more than $1 billion to the state-owned Saudi National Bank, which would own nearly 10 percent of Credit Suisse after the transaction.
Thursday’s earnings announcement underscored the urgency behind the vast restructuring. Credit Suisse said its loss reflected weak performance in its investment bank, as well as charges related to legal settlements in a New Jersey mortgage-bonds investigation and a French money-laundering case.
“This is not an acceptable outcome,” Dixit Joshi, Credit Suisse’s chief financial officer, told analysts.
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