GENEVA – Credit Suisse Group, Switzerland’s second-largest bank, unveiled a new plan Wednesday to boost its capital buffers by as much as 15.3 billion Swiss francs ($15.6 billion) while reporting a 2.6 per cent rise in second-quarter profits.
The news cheered traders, who sent the bank’s shares higher. They were up 4 per cent, at 17.83 francs ($18.24), on the Zurich exchange in early afternoon. Until Wednesday, the bank’s shares had fallen 22 per cent this year.
The capital increase is seen as a direct response to criticism from the Swiss central bank, which earlier this year warned that Credit Suisse’s capital reserves were below international norms for withstanding a financial crisis. The bank had rejected that criticism, but lost market value when unconvinced investors sold its shares.
Credit Suisse said it would raise 8.7 billion francs immediately. Of that, some 3.8 billion francs will come from issuing convertible bonds underwritten by investors from Qatar, Saudi Arabia, Norway and Singapore.
The rest of the capital would be raised by other measures such as divestments, including sales of real estate, exchanging hybrid capital notes, and paying bonuses in shares.
Chief Executive Brady Dougan said the measures “should completely put any capital questions to rest” by almost doubling the bank’s capital ratio compared with the first quarter.
The Zurich-based bank made the announcement as it posted its second quarter earnings — net profit increased to 788 million francs ($806 million) from 768 million francs in the same quarter of 2011.
The bank is trying to turn around its global image after weathering crackdowns in the U.S. and in Europe on tax-evading citizens suspected of stashing resources into Swiss banks.
Dougan had successfully led the bank through the 2008-2009 global financial crisis without resorting to a government bailout like UBS AG, Switzerland’s largest bank.
In a statement Wednesday the Swiss National Bank welcomed the plan to raise capital, saying that “in an environment that remains particularly challenging for the international banking system, these measure substantially increase the resilience of Credit Suisse Group.”
Credit Suisse also said it plans to save another 1 billion francs by the end of 2013, after cutting 2 billion francs in costs by mid-year 2012 and announcing plans last year to shed 3,500 jobs. The bank now has 48,200 employees.