Credit Suisse confirmed on Tuesday that it was selling much of its securitised products group to private equity group Apollo, as the Swiss bank slashes a business that generated substantial profits but ate up large amounts of capital.
Credit Suisse last month announced a radical restructuring plan — including carving up and spinning off its investment bank, cutting thousands of jobs and raising $4bn in capital — to help it move on from a litany of scandals and a SFr4bn ($4.2bn) third-quarter loss.
It was the bank’s second strategic revamp announcement in less than 12 months, this time under the leadership of chief executive Ulrich Körner and chair Axel Lehmann, who have been brought in to cut costs and refocus the business on wealth management.
The changes will result in 9,000 jobs cut from Credit Suisse’s 52,000 global workforce over the next three years. The bank has attracted investment from the Saudi National Bank to help pay for the restructuring.
The New York-based securitised products business packages debts, such as mortgages and loans for yachts, before selling them on as securities.
The sale, which includes other related businesses, will reduce the bank’s capital burdens but also do away with one of its most profitable businesses.
Credit Suisse on Tuesday said Apollo had agreed to acquire a “significant part” of the assets of its securitised products business, reducing its holdings of such assets from $75bn to $20bn.
It added that the transactions, which it expected to complete by mid-2023, would achieve a release of risk-weighted assets of up to $10bn and improve the bank’s common equity tier one ratio, a reflection of financial resilience.
Apollo is expected to hire most of the securitised products team, which is led by Jay Kim and has its roots in the bank’s mortgage securitisation business in the 1980s.
Credit Suisse did not announce a price for the deal in its Tuesday statement.
“We lack important financial details for an assessment of the transactions,” said Andreas Venditti, an analyst at Vontobel. “Some of the details do not seem to have been finalised yet.”
Shares in Credit Suisse dropped 1.8 per cent in early trading on Tuesday, having fallen more than 50 per cent this year.
The bank’s board and management decided the unit required too much capital and had little overlap with its private wealth business, which will become the bank’s core focus after the restructuring.
Credit Suisse previously announced that it had entered into an exclusivity agreement with an investor group led by Apollo that also included US bond manager Pimco to transfer a significant portion of its securitised products group.