Credit Suisse May Not Need IPO to Bulk Up Buffers, Herro Saysby and
The bank announced in December that it would pay more than $5 billion to end a years-long U.S. investigation into the role of its mortgage securities business in the 2008 financial crisis. Credit Suisse will take a fourth-quarter pretax charge of about $2 billion as a result of the penalties.
“It looks like it wasn’t such an egregious settlement,” Harris Associates’ Chief Investment Officer David Herro said in a Bloomberg TV interview on Friday. “There doesn’t seem to be a lot more negative in the pipeline as far as settlements and penalties and fines.”
“If this is the case, perhaps with the internal profitability build, they might not need to put that Swiss banking unit public for capital reasons,” he said, adding that the lender may have other reasons for pursuing the share sale.
Herro’s comments clash with those of some analysts who say the bank must do more to bulk up its capital buffers, among the weakest of European lenders. Credit Suisse needs a successful Swiss offering in light of last month’s settlement, Vontobel analyst Andreas Venditti, who has a hold rating on the stock, said in a note this week.
Switzerland is a major plank in Chief Executive Officer Tidjane Thiam’s plans to increase profitability by scaling back investment banking in favor of wealth management activities that require less capital. Credit Suisse plans to raise 2 billion francs ($1.98 billion) to 4 billion francs in an initial public offering of 20 percent to 30 percent of the Swiss unit before the end of 2017.
Harris Associates increased its stake in Credit Suisse to more than 10 percent after the stock dipped below 16 francs last year. The Chicago-based company has since trimmed its position to below 10 percent, Herro said.
The shares were trading at 15.7 francs at 1:48 p.m. on Friday, for a gain of 7.6 percent so far this year.