Credit Suisse shows its strength with a $3 billion bond buyback

Credit Suisse ( CS ) announced it will buy up to $3 billion of its own notes to reduce the amount of money it spends on debt service fees while capitalizing on current market conditions.

Investors raised concerns about the struggling Swiss bank’s financial health before the bank published its reorganization plan later this month, prompting the bank to make the news on Friday.

Earlier in the week, the stock price hit an all-time low, but has since recovered. They jumped sharply higher on Friday, climbing 6% in morning trade in Zurich.

They have lost over half their value so far this year. An indication to investors that Credit Suisse is not overly concerned about maintaining its cash reserves is provided by the bond announcement.

Credit Suisse shows strength with $3 billion bond buyback (2)
Credit Suisse shows strength with $3 billion bond buyback (2)

After reports on social media raised doubts about whether the bank had adequate capital to absorb significant losses or deal with an unexpected shock, analysts rushed to look at the bank’s books for answers.

Credit Suisse plans to downsize its investment bank while expanding its wealth management division, according to a new study by Keefe, Bruyette & Woods. It will be an expensive operation that could cost up to 6 billion Swiss francs ($6 billion).

The asset sale is likely to cover only 2 billion Swiss francs. Although years of scandals and fines have hurt the bank’s business, industry experts believe Switzerland’s second-largest bank is not on the brink of bankruptcy, although market turmoil may make it difficult for the bank to raise the cash it needs to to fund its turnaround ambitions.

In a note to clients, JPMorgan Chase analyst Kian Abuhossein said: “From our perspective, looking at the firm’s financial results at the end of the second quarter, we perceive [Credit Suisse’s] the capital and liquidity position as stable.’

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