labels: UBS Warburg, Credit Suisse
Credit Suisse rescues itself, UBS gets funds infusion news
16 October 2008

Two leading Swiss banks, UBS and Credit Suisse have said that they have secured support of around $14.1 billion from Swiss authorities and / or outside investors, including the Qatar Investment Authority.

Credit Suisse announced that it reached an agreement on a consent decree with the Swiss Federal Banking Commission (SFBC) regarding future capital targets and leverage requirements.

In a statement, Credit Suisse said it has raised a total of approximately net CHF 10 billion by the sale of Credit Suisse Group treasury shares, by issuing new Credit Suisse Group shares through mandatory convertible bonds and by issuing non-dilutive hybrid tier 1 capital. Supplementing its already strong capital position will allow Credit Suisse to continue building its client franchise and taking advantage of targeted growth opportunities.

Credit Suisse had reported a third quarter loss of $1.3 billion after further losses. The bank said it had raised tier-1 capital from a small group of major global investors, the largest participant being the Qatar Holding LLC, a 100 per cent subsidiary of the Qatar Investment Authority, through the sale of approximately 93 million Credit Suisse Group treasury shares for proceeds of approximately CHF 3.2 billion of common equity, and the issuance of mandatory convertible bonds convertible into approximately 50 million new shares of common equity for proceeds of approximately CHF 1.7 billion.

Additionally, Credit Suisse issued non-dilutive hybrid tier 1 capital for net proceeds of approximately CHF 5.5 billion. The bank said that it now already exceeds the SFBC's 2013 capital targets and minimum leverage requirements.

In its statement, Credit Suisse also welcomed measures announced by the Swiss authorities that apply to the Swiss banking system, calling them ''important for Switzerland's financial institutions''. The bank also said that for the third quarter of 2008, the Group expects to announce a net loss of approximately CHF 1.3 billion.

It announced strong operating results for the third quarter in its private banking division with strong net new asset inflows in both the wealth management division and the Swiss corporate and retail banking business.

Simultaneously, the Swiss National Bank said it had established a fund to absorb toxic assets from UBS.

Swiss National Bank president Jean-Pierre Roth termed it 'preferable' to proceed with the recovery operation at the present time in an 'orderly' fashion, rather than later under potentially ''more adverse conditions''.

UBS said it would receive an infusion of government money in the form of mandatory convertible notes valued at around $5.3 billion. The injection of government funds into UBS could represent a nine per cent stake in the bank. UBS' $44 billion losses pertaining to toxic assets have been the worst in Europe. UBS reported a third-quarter net income of $261 million.

The Swiss National Bank announced the creation of a fund to enable UBS to transfer $60 billion worth of toxic assets from its balance sheet.

UBS said the fund would be capitalized with $6 billion of equity capital provided by UBS and $54 billion from the Swiss National Bank. In its statement, UBS said ''With this transaction, UBS caps future potential losses from these assets, secures their long-term funding, reduces its risk-weighted assets and materially de-risks and reduces its balance sheet.'' The assets transferred into the new fund include $31 billion pertaining to the US sub-prime and other markets that included mortgage-based securities, along with securities backed by student loans.

UBS said that at completion of the transaction, its next exposure in these categories would be practically zero.

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Credit Suisse rescues itself, UBS gets funds infusion