ZURICH (dpa-AFX) - Credit Suisse Group (CS) Wednesday said it plans to increase capital by 8.7 billion francs in preparation for Basel III regulatory requirements. Aiming for considerable operating flexibility, the bank increased its cost saving target. On the operational front, the Swiss banking giant reported higher profit in its second quarter, benefited by lower expenses, even as revenues at private banking and asset management segments were hurt amid adverse market conditions.
Chairman of the Board Urs Rohner said, 'Unquestioned capital strength is of paramount importance to the Group. Given the current environment, we decided to accelerate the implementation of our capital plans in a manner which eliminates any doubts raised by the 2012 SNB Financial Stability Report.'
In June, the Swiss National Bank in its periodic financial-stability report had singled out that Credit Suisse would need more capital.
Credit Suisse, today, said its additional capital actions and earnings related impacts would increase the capital by a further 6.6 billion francs by year-end 2012.
The planned capital boost, in light of the current regulatory and market environment, will result in an expected end-2012 look-through Swiss Core Capital Ratio of 9.4 percent, compared to the 2018 requirement of 10 percent. The capital measures include mandatory and contingent convertible securities offering of 3.8 billion Swiss francs issued at a fixed conversion price of 16.29 francs per share.
Further, Credit Suisse said it now expects to achieve end-2013 cost savings of 3 billion francs, as the earlier forecast of 2 billion francs was achieved 18 months early - in the first half of fiscal 2012.
Credit Suisse also announced a tender offer to repurchase certain outstanding public capital and senior funding instruments.
Further, the bank said it intends to sell certain illiquid private equity businesses within the Asset Management division in line with its strategy toward a more liquid alternatives business. It is also in advanced negotiations for outright sales covering two major real-estate sites and a number of smaller buildings.
For its second quarter, Credit Suisse's net income attributable to shareholders increased 2.6 percent to 788 million francs (about $806.26 million). Underlying net income, which excluded certain items, grew 3.6 percent to 815 million francs. Meanwhile, reported earnings per share declined 4.2 percent to 0.46 francs, and underlying earnings per share dropped 2 percent to 0.48.
Pre-tax income was 1.11 billion francs, compared to last year's income of 1.09 billion francs. In the quarter, a decline in earnings of private banking and asset management segments were more than offset by an 84 percent climb in Investment Banking earnings.
Net revenues declined to 6.28 billion francs from 6.89 billion francs last year.
In the quarter, Investment Banking segment's fixed income sales and trading revenues increased 96 percent, led by a marked improvement in securitized products and higher results in corporate lending, global rates, emerging markets and global credit products.
The bank reported net new asset inflows of 4.4 billion francs in the quarter, of which majority came from Wealth Management Clients, mainly from its ultra-high-net-worth individual client segment and emerging markets.
Credit Suisse will release its detailed financial report for the second quarter on July 24.
In Zurich, Credit Suisse shares are currently trading at 17.90 francs, up 0.76 francs or 4.43 percent.
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