Credit Suisse Touts Strong Start to '09

Switzerland's second-largest bank Credit Suisse said on Tuesday it would ask shareholders for the option to raise equity capital for acquisitions and said 2009 had started well.

In line with steps taken by some international bank players, Credit Suisse said it would ask shareholders at an annual general meeting on April 24 to let it issue up to 100 million shares of authorized capital, or 10 percent of its capital, "for the purpose of financing the acquisition of companies."

This would amount to 3.7 billion Swiss francs ($3.30 billion) at current market prices.

The bank would also ask to be allowed to issue another 100 million shares of conditional capital "to maintain strategic flexibility," after it almost entirely used up capital related to mandatory convertible notes issued in October last year.

The Swiss bank has so far managed to weather the crisis without government help and was able to raise 10 billion Swiss francs ($8.91 billion) from investors at the end of last year.

The bank is also extremely well-capitalized compared to many international peers and has a tier 1 ratio of above 13 percent.

"Credit Suisse made a capital increase last year and they have used up all the authorization. Now they want to be prepared," said Dirk Becker at Kepler Equities, who however, does not see any acquisition by Credit Suisse.

"Definitely not in the short term," he said.

Asked about possible acquisition targets, a bank spokesman reiterated that the bank was focusing on organic growth.

Credit Suisse, which analysts see as one of the winners in the financial crisis, reiterated it was well poised to benefit from a market upswing and said it could withstand further market turbulence if it persisted.

"Credit Suisse has had a strong start to 2009," the bank said in a letter to shareholders in its annual report, but did not give details. "We have positioned our businesses to be less susceptible to negative market trends if they persist in the coming months and to prosper when markets recover."

Sharon Lorimer

The bank had said in February each of its divisions was showing a profit in the year-to-date.

It said at the time that it had inflows at its key wealth management division.

Seeking Flexibility

Several bank players, including local rival UBS, have said they will ask shareholders to be able to raise capital, mostly to bolster their financial strength as the financial crisis continues.

But some have specifically mentioned the option of acquisitions.

HSBC, Europe's biggest bank, is in the process of raising over $18 billion in a rights issue to boost its capital and potentially make acquisitions to take advantage of turmoil among rivals.

Standard Chartered, which like HSBC and Credit Suisse has outperformed rivals during the crisis, raised $2.7 billion in December and may use some of the cash on deals.

Both HSBC and Standard Chartered are considering buying some of Royal Bank of Scotland's assets in Asia, sources have said.

"In this environment, where the prices have come down, why shouldn't a well-capitalized bank like Credit Suisse go for it," Vontobel analyst Teresa Nielsen said.

Shares in Credit Suisse were down 3.64 percent at the close.

The Dow Jones index of European bank stocks, was down 1.43 percent.

Credit Suisse posted its biggest-ever annual loss of 8.2 billion Swiss francs in 2008 after its fourth-quarter results were hit by trading losses.

Credit Suisse appointed on March 9 Hans-Ulrich Doerig as its new chairman after Walter Kielholz left the bank to be chairman of insurer Swiss Re.

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