Investors are concerned about the possibility of a capital increase

CENTRAL, Hong Kong - Nov. 8, 2022 - PRLog -- Reuters reported today, citing unidentified sources, that CS is in talks with investors about potentially raising capital as the struggling bank tries to turn itself around.

According to the Reuters story, CS is considering abandoning the U.S. market as it revamps its investment banking business, but a CS representative replied to the news, stating the bank has no intentions to do so.

CS has had several issues in recent years, including its involvement in Archegos Capital and Greensill Capital, both of which failed, as well as regulatory issues.

CS recruited a new CEO Ulrich Körner in July and has begun a transformation plan that includes cost cutting and substantially restructuring its investment bank, whether by reducing it or separating it into three independent businesses. Management is also thinking about selling a portion of its securitization business.

"The net charge for an exit from the securitised products group could potentially be absorbed without the need for a capital raise, which we expect management would be keen to avoid given the stock is trading on only 0.3 times price to tangible book value," Citigroup analyst Andrew Coombs wrote in a research note.

While CS is in trouble right now, the bank only trades at 24% of its tangible book value, or net worth, following today's drop, which certainly fits in many of the firm's problems. If challenged banks can be turned around, they may sometimes be excellent investments.

However, before I consider investing, I would need to know more about CS's transformation goals and whether it intends to raise cash, which would dilute existing shareholders.

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