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November 25, 2020

Credit Suisse to take $450m charge on stake in York Capital Management

Credit Suisse expects to book an impairment of around $450m for a stake in alternative investment firm York Capital Management, which intends to wind down its European hedge funds business.

The investment firm accounted for around 1% of the CHF438bn ($481bn) overseen by the Swiss bank’s asset management unit at the end of last year.

Established in 1991 by Jamie Dinan, York Capital Management is overhauling its strategy.

As part of this overhaul, the firm will now prioritise longer duration assets including private equity, private debt, as well as collateralised loan obligations (CLOs).

Credit Suisse, which took a stake in the investment firm in 2010 for $425m, will take the charge in the final quarter of this year.

The bank plans to retain an interest in York Capital Management’s Asia-Pacific unit, which is expected to be spun out as a new and separate hedge fund in 2021.

Commenting on the move, the Swiss bank said: “In view of this announcement, Credit Suisse will take an impairment to the valuation of the non-controlling interest that the bank has owned in York since 2010.

“The amount of the impairment taken will be assessed as part of our year-end process, but is currently expected to be approximately USD 450 million. This will be booked in the 4Q20 results of the Asset Management business within our International Wealth Management division.

The Swiss bank stressed that the charge will not impact its intention to return capital to shareholders.

However, it is expected to lower the bank’s CET1 ratio by nearly 7 basis points in the fourth quarter.

Meanwhile, recently, a report said that Credit Suisse is open to merger and acquisition (M&A) opportunities, especially in its wealth management business.

The bank’s CEO Thomas Gottstein spoke at Bloomberg’s Future of Finance virtual event that consolidation “is needed and will happen”.

In Q3 2020, Credit Suisse reported a 38% slump in net profit, missing analyst expectations, with the exclusion of a one-off gain that lifted last year’s performance.

 

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