Credit Suisse to raise $4bn to fund a sweeping overhaul

Credit Suisse Group unveiled a strategic plan that will see the bank undertake a multi-billion dollar capital raise, a carve out of its investment bank and thousands of job cuts as it seeks a return to profitability.

The Zurich-based bank plans to raise 4bn francs ($4.1bn) through two capital raises, including a rights issue and selling shares to investors including the Saudi National Bank, according to statement on Thursday.

The firm is also breaking up the investment bank, creating a separate advisory and capital markets business that will revive the First Boston branding.

The overhaul is the most urgent attempt yet to repair Credit Suisse after huge losses and management chaos shattered its status as one of Europe’s most prestigious lenders. Chief executive officer Ulrich Koerner and chairman Axel Lehmann, brought in as crisis managers, now face the task of executing the biggest overhaul in the bank’s recent history, while protecting the wealth management unit that will determine its future.

“This is a historic moment for Credit Suisse,” chief executive officer Ulrich Koerner said in a statement. “We are radically restructuring the Investment Bank to help create a new bank that is simpler, more stable and with a more focused business model built around client needs.”

The plan includes carving out Credit Suisse’s advisory and leveraged finance business into a separate unit renamed Credit Suisse First Boston which will be led by ex-Citigroup banker Michael Klein. The firm will also start headcount reduction of 2,700 positions in the fourth quarter, with the bank’s workforce set to decline to about 43,000 by 2025 from 52,000.

The bank is also selling a majority of its securitised products unit to Apollo Global Management and Pacific Investment Management Co.