Credit Suisse Group's new chief executive has asked investors for fewer than 100 days to deliver a turnaround strategy. Turbulent markets are making that feel like a long time.
The cost of insuring the company’s bonds against default climbed about 15 per cent last week to levels not reported since 2009 while its shares touched a record low.
On Friday, Ulrich Koerner reassured staff that the bank had a “strong capital base and liquidity position” and told employees that he would be sending them a regular update until the company announces a new strategic plan on October 27.
Mr Koerner, who was appointed in late July, has had to deal with market speculation, banker exits and capital doubts as he seeks to set a path forward for the troubled Swiss bank.
The lender is finalising plans that could involve sweeping changes to its investment bank and may include cutting thousands of jobs over a number of years, Bloomberg reported.
Mr Koerner’s memo was the second Friday missive in a row as speculation over the bank’s future increases.
Analysts at KBW estimated that the company may need to raise 4 billion Swiss francs ($4bn) in capital even after selling some assets to fund any restructuring, growth efforts and any unknowns.
Credit Suisse’s market capitalisation dropped to about 10bn Swiss francs, meaning any share sale would be highly dilutive to longtime holders. The market value was above 30bn francs as recently as March 2021.
Credit Suisse executives have noted that the company’s 13.5 per cent Common Equity Tier-1 (CET1) ratio at June 30 was in the middle of the planned range of 13 per cent to 14 per cent for 2022.
The company's 2021 annual report said that its international regulatory minimum ratio was 8 per cent, while Swiss authorities required a level of about 10 per cent.
The five-year credit default swaps price of about 250 basis points is up from about 55 bps at the start of the year and is near the highest on record.
While these levels are still far from distressed and are part of a broad market sell-off, they signify deteriorating perceptions of creditworthiness for the bank in the current environment.
The KBW analysts were the latest to draw comparisons to the crisis of confidence that shook Deutsche Bank six years ago.
Then, the German lender was facing broad questions about its strategy as well as near-term concerns about the cost of a settlement to end a US investigation into mortgage-backed securities.
Deutsche Bank's credit-default swaps climbed, its debt rating was downgraded and some clients stepped back.
The stress eased over several months as the German lender settled for a lower figure than many feared, raised about €8bn ($7.8bn) in new capital and announced a strategy revamp.
Still, what the bank called a “vicious circle” of declining revenue and rising funding costs took years to reverse.
There are differences between the two situations. Credit Suisse does not face any one issue on the scale of Deutsche Bank’s $7.2 billion settlement, and its key capital ratio of 13.5 per cent is higher than the 10.8 per cent that the German lender had six years ago.
The stress Deutsche Bank faced in 2016 resulted in the unusual dynamic where the cost of insuring against losses on the lender’s debt for one year surpassed that of protection for five years.
Credit Suisse’s one-year swaps are still significantly cheaper than five-year swaps.
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Bio
Born in Dibba, Sharjah in 1972.
He is the eldest among 11 brothers and sisters.
He was educated in Sharjah schools and is a graduate of UAE University in Al Ain.
He has written poetry for 30 years and has had work published in local newspapers.
He likes all kinds of adventure movies that relate to his work.
His dream is a safe and preserved environment for all humankind.
His favourite book is The Quran, and 'Maze of Innovation and Creativity', written by his brother.
What the law says
Micro-retirement is not a recognised concept or employment status under Federal Decree Law No. 33 of 2021 on the Regulation of Labour Relations (as amended) (UAE Labour Law). As such, it reflects a voluntary work-life balance practice, rather than a recognised legal employment category, according to Dilini Loku, senior associate for law firm Gateley Middle East.
“Some companies may offer formal sabbatical policies or career break programmes; however, beyond such arrangements, there is no automatic right or statutory entitlement to extended breaks,” she explains.
“Any leave taken beyond statutory entitlements, such as annual leave, is typically regarded as unpaid leave in accordance with Article 33 of the UAE Labour Law. While employees may legally take unpaid leave, such requests are subject to the employer’s discretion and require approval.”
If an employee resigns to pursue micro-retirement, the employment contract is terminated, and the employer is under no legal obligation to rehire the employee in the future unless specific contractual agreements are in place (such as return-to-work arrangements), which are generally uncommon, Ms Loku adds.
IF YOU GO
The flights: FlyDubai offers direct flights to Catania Airport from Dubai International Terminal 2 daily with return fares starting from Dh1,895.
The details: Access to the 2,900-metre elevation point at Mount Etna by cable car and 4x4 transport vehicle cost around €57.50 (Dh248) per adult. Entry into Teatro Greco costs €10 (Dh43). For more go to www.visitsicily.info
Where to stay: Hilton Giardini Naxos offers beachfront access and accessible to Taormina and Mount Etna. Rooms start from around €130 (Dh561) per night, including taxes.
Another way to earn air miles
In addition to the Emirates and Etihad programmes, there is the Air Miles Middle East card, which offers members the ability to choose any airline, has no black-out dates and no restrictions on seat availability. Air Miles is linked up to HSBC credit cards and can also be earned through retail partners such as Spinneys, Sharaf DG and The Toy Store.
An Emirates Dubai-London round-trip ticket costs 180,000 miles on the Air Miles website. But customers earn these ‘miles’ at a much faster rate than airline miles. Adidas offers two air miles per Dh1 spent. Air Miles has partnerships with websites as well, so booking.com and agoda.com offer three miles per Dh1 spent.
“If you use your HSBC credit card when shopping at our partners, you are able to earn Air Miles twice which will mean you can get that flight reward faster and for less spend,” says Paul Lacey, the managing director for Europe, Middle East and India for Aimia, which owns and operates Air Miles Middle East.
Red flags
- Promises of high, fixed or 'guaranteed' returns.
- Unregulated structured products or complex investments often used to bypass traditional safeguards.
- Lack of clear information, vague language, no access to audited financials.
- Overseas companies targeting investors in other jurisdictions - this can make legal recovery difficult.
- Hard-selling tactics - creating urgency, offering 'exclusive' deals.
Courtesy: Carol Glynn, founder of Conscious Finance Coaching
Groom and Two Brides
Director: Elie Semaan
Starring: Abdullah Boushehri, Laila Abdallah, Lulwa Almulla
Rating: 3/5
More from Rashmee Roshan Lall
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
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The years Ramadan fell in May
How Apple's credit card works
The Apple Card looks different from a traditional credit card — there's no number on the front and the users' name is etched in metal. The card expands the company's digital Apple Pay services, marrying the physical card to a virtual one and integrating both with the iPhone. Its attributes include quick sign-up, elimination of most fees, strong security protections and cash back.
What does it cost?
Apple says there are no fees associated with the card. That means no late fee, no annual fee, no international fee and no over-the-limit fees. It also said it aims to have among the lowest interest rates in the industry. Users must have an iPhone to use the card, which comes at a cost. But they will earn cash back on their purchases — 3 per cent on Apple purchases, 2 per cent on those with the virtual card and 1 per cent with the physical card. Apple says it is the only card to provide those rewards in real time, so that cash earned can be used immediately.
What will the interest rate be?
The card doesn't come out until summer but Apple has said that as of March, the variable annual percentage rate on the card could be anywhere from 13.24 per cent to 24.24 per cent based on creditworthiness. That's in line with the rest of the market, according to analysts
What about security?
The physical card has no numbers so purchases are made with the embedded chip and the digital version lives in your Apple Wallet on your phone, where it's protected by fingerprints or facial recognition. That means that even if someone steals your phone, they won't be able to use the card to buy things.
Is it easy to use?
Apple says users will be able to sign up for the card in the Wallet app on their iPhone and begin using it almost immediately. It also tracks spending on the phone in a more user-friendly format, eliminating some of the gibberish that fills a traditional credit card statement. Plus it includes some budgeting tools, such as tracking spending and providing estimates of how much interest could be charged on a purchase to help people make an informed decision.
* Associated Press
Defence review at a glance
• Increase defence spending to 2.5% of GDP by 2027 but given “turbulent times it may be necessary to go faster”
• Prioritise a shift towards working with AI and autonomous systems
• Invest in the resilience of military space systems.
• Number of active reserves should be increased by 20%
• More F-35 fighter jets required in the next decade
• New “hybrid Navy” with AUKUS submarines and autonomous vessels
Ain Dubai in numbers
126: The length in metres of the legs supporting the structure
1 football pitch: The length of each permanent spoke is longer than a professional soccer pitch
16 A380 Airbuses: The equivalent weight of the wheel rim.
9,000 tonnes: The amount of steel used to construct the project.
5 tonnes: The weight of each permanent spoke that is holding the wheel rim in place
192: The amount of cable wires used to create the wheel. They measure a distance of 2,4000km in total, the equivalent of the distance between Dubai and Cairo.
