CREDIT Suisse hit back at an activist investor that called for a rethink of the bank’s strategy on contingent convertible or “coco” bail-in capital yesterday.
Swiss shareholder Ethos Foundation, an influential voice among institutional investors, said it opposed the bank’s decision to issue billions of francs of contingent convertible capital to support its trading.
But Credit Suisse slammed the stance as “simply incomprehensible” and said it had the support of regulators and its investors.
Ethos executive director Dominique Biedermann questioned the value of the investment bank’s trading activities, arguing they do not work in the long-term interest of shareholders and pay “excessive” salaries to staff.
“These activities are very capital intensive and carry risks that are not in line with the long term interests of Credit Suisse’s shareholders. Without these activities, the issuance of cocos is not necessary,” he said.
Credit Suisse plans to issue 6bn Swiss francs (£3.8bn) of coco bonds – equivalent to 42 per cent of its issued share capital – to meet strict regulatory requirements that require it to be able to absorb any losses from its risky trading division.
Ethos said investors should oppose the plan and a SwFr1.5bn dividend payment to “reinforce the bank’s core equity and avoid issuing cocos”.
A spokesman for the bank said: “Credit Suisse finds it simply incomprehensible that Ethos is not supporting these efforts to build a more stable financial system.
“The measures we are taking are in line with the approach prescribed by the regulatory authorities, and we are fully convinced that our measures are also in the interests of our shareholders, since any other form of capital increase would have a direct dilutive effect.”