Credit Suisse Group AG, Switzerland’s second-biggest bank, said it exchanged $4.5 billion of notes held by the Qatar Investment Authority into debt that qualifies as capital under stricter rules.
The Zurich-based bank and Qatari sovereign wealth fund swapped the Tier 1 capital notes for contingent-convertible bonds on Oct. 23 in a transaction approved by Swiss financial regulator Finma, Credit Suisse said in a report today.
The bank and Persian Gulf nation have boosted ties after the wealth fund participated in Credit Suisse’s capital increase during the 2008 financial crisis. The swap helps the Swiss lender meet demands from the regulator that it boost reserves of capital that can better absorb losses amid turmoil such as that following the meltdown of the U.S. housing market.
“Credit Suisse gets to swap the old capital notes for ones which are compatible with new regulations,” Arun Melmane, an analyst with Canaccord Genuity Corp. in London who recommends investors hold Credit Suisse shares, said today by phone. “Qatar sees a strengthening of the bank’s capital.”
Credit Suisse rose 0.8 percent to 28.40 Swiss francs as of 12:13 p.m. in Zurich. The stock has surged 31 percent this year, more than the 19 percent increase of the Bloomberg Europe Banks and Financial Services Index in the same period.
The company said in February 2011 that the new notes, known as CoCos because they convert into equity in the contingency of capital levels falling below a preset threshold, would be issued to Qatar no earlier than October of this year.
Tier 1 Ratio
The bank’s common equity Tier 1 ratio stood at 16.3 percent at end September, more than double the 7 percent threshold that would trigger the CoCos, the company said last week.
Qatar Holding, the wealth fund’s direct investment arm, has accumulated a $1 billion stake in Bank of America Corp. after starting to buy shares about two years ago, the Financial Times reported yesterday, citing people familiar with the matter. Bank of America is the second-biggest U.S. lender.
Credit Suisse raised 10 billion francs ($11 billion) from investors in Qatar, Israel and Saudi Arabia in October 2008 to replenish capital. UBS AG, Switzerland’s largest bank, was forced to ask the country’s taxpayers for aid after losses mounted.
Qatar Holding LLC holds 5.2 percent of Credit Suisse’s shares and 21.73 percent of its voting rights, SIX Swiss Exchange said in a statement on its website today.
The difference reflects the bonds that could be converted into stock that corresponds to about 16 percent of Credit Suisse’s current number of shares if a decline in its equity were to trigger the notes, Marc Dosch, a bank spokesman, said by phone from Zurich today.