FRANKFURT/LONDON/ZURICH Credit Suisse (CSGN.S) is considering a quickfire share sale rather than pursuing a separate listing for its Swiss banking division, two sources close to the matter told Reuters, in a move that could raise 3 billion Swiss francs (2 billion pounds).
Keen to shore up its balance sheet, Swizterland's second-biggest bank had announced plans in 2015 to sell 20-30 percent of its highly profitable Swiss business through an initial public offering (IPO) for up to 4 billion francs.
However, Chief Executive Tidjane Thiam said last month that the bank was examining alternatives to the IPO, which had been penciled in for the second half of this year.
"They need more capital," said one of the sources. "They realise they can do this without an IPO."
The likelihood of the IPO going ahead is now low, but the team behind it is continuing work on the project because there has not yet been an official decision, the second source said, adding that a rights issue is another option.
Reuters reported on Friday that the bank's board of directors will decide in April whether to proceed with the IPO.
Credit Suisse declined to comment on Thursday.
The bank's shares fell more than 3 percent by 1430 GMT, the biggest decliner in the Stoxx European banking index .SX7P.
Buoyant markets recently helped UniCredit (CRDI.MI) to conduct a 13 billion euro ($14 billion) capital increase, while Deutsche Bank (DBKGn.DE) is lining up an 8 billion euro share issue.
The latest Credit Suisse plan involves an accelerated bookbuilding, the sources said, through which a company can sell shares in a short period of time to institutional investors. The sale can be launched overnight with a tight timetable.
Such a move would boost its balance sheet after a heavy loss last year and a multibillion-dollar penalty for the sale of toxic mortgage debt.
Under Swiss securities law, companies are not required to draw up a listing prospectus if it is increasing its share capital by less than 10 percent.
In the case of Credit Suisse, that would allow the bank to raise about 3 billion francs.
One trader said that issuing new shares at group level would be less dilutive than an IPO of the Swiss business.
Larger rival UBS (UBSG.S) has already moved to strengthen its capital base.
At the end of 2016 UBS had a common equity tier 1 ratio -- a closely watched measure of balance sheet strength -- of 13.8 percent, compared with Credit Suisse's 11.6 percent.
(Additional reporting by Danilo Masoni; Editing by Michael Shields and David Goodman)