The SNB is therefore of the view that both big banks should further expand their loss-absorbing capital. For UBS, this implies a continuation of its capital strengthening process; and for Credit Suisse, an acceleration of the process, with a marked increase during the current year. … For Credit Suisse, given the low starting point and the risks in the environment, it is essential that it already substantially expand its loss-absorbing capital base during the current year. Apart from the planned reduction of risk, these improvements can also be achieved in other ways, such as by suspending dividend payments, or even by raising capital on the market through share issuance.
This was unwelcome news, and the banks’ loss-absorbing capital absorbed some losses, with CS down 9.4% today. This may have come as some surprise to the SNB, which thought that its suggestions were actually shareholder-friendly, saying that it “is also in the banks’ own interest to strengthen their resilience, as a sound capital base constitutes a competitive advantage in the core business of wealth management.” JPMorgan’s Kian Abouhossein agrees, arguing in a report today that CS will improve capital by shrinking assets, mainly in the investment bank, and that: Read more »