Zurich: Credit Suisse Group AG will raise 4 billion francs (Dh14.7 billion, $4.03 billion) in a rights offer and abandoned plans to sell part of its Swiss business as Chief Executive Officer Tidjane Thiam moved to end concerns about the bank’s capital levels.

The announcement ended weeks of speculation on how the Zurich-based bank would raise funds and came as the bank posted a profit of 596 million francs, powered by trading gains. That compares to a loss of 302 million francs a year earlier and the 336 million-franc average of seven analyst estimates compiled by Bloomberg. The bank also plans to move to an all-cash dividend.

Credit Suisse is the third major European bank to sell shares this year after Deutsche Bank AG and UniCredit SpA raised a combined 21 billion euros. The bank’s stock has rebounded from a record low in July, making a sale more attractive, while analysts and investors had questioned the merit of an IPO of its Swiss unit, which has generated its largest profit.

“A straight capital increase is less dilutive than the IPO,” Thiam said in an interview with Bloomberg Television on Wednesday. “Under normal circumstances, that should be it” he said, referring to the bank’s capital measures. The bank cut 1,400 jobs in the first quarter as part of plans to trim 5,500 positions this year.

Bloomberg reported last month that the bank was considering the sale of stock valued at more than 3 billion francs as an alternative to its long-standing plan to raise capital by listing part of its Swiss unit.

Wealth profits

Pretax profit at the international wealth management unit, which doesn’t include Switzerland or the Asia-Pacific region, fell 3 per cent to 291 million francs due to lower revenue from transactions and net interest income. Analysts had been expecting the bank to post a profit of 324 million francs. The global markets unit swung to a profit of 317 million francs, driven by credit trading, compared with estimates for a profit of 186 million francs.

Credit Suisse reported 11.7 per cent of risk-weighted assets in common equity Tier 1 capital, up from 11.5 per cent at the end of 2016. The bank is targeting 12-13 per cent next year to comply with coming regulatory requirements and to underpin big loans to wealthy clients.

It expects its CET1, a measure of its ability to absorb losses, to be 13.4 per cent following the capital increase, which it will propose at an extraordinary shareholder meeting on May 18.

European banks have rallied on the prospect that economic growth and rising interest rates could help revive earnings. Still, Credit Suisse is still down more than 30 per cent from when Thiam announced the IPO plan in October 2015.

Wealth management

In the second year of an overhaul, Thiam is under pressure to show that cuts made at the bank’s global markets division are paying off. Surprise write downs on risky trading positions contributed to a loss in 2016, prompting him to step up efforts to scale back the unit. At the same time, the bank is focusing on wealth management because of the potential for steadier revenues and need for less capital.

“The capital raise should be enough to allay concerns in the near term but doesn’t really give the franchise the flexibility to see it through a downturn or meaningfully compete in global markets,” said Chirantan Barua, an analyst at Sanford C Bernstein. “We feel this raise doesn’t really take capital totally out of the concern zone “” just makes it cycle/earnings dependent for the next 12 months.”

The bank said it remains cautious about its short-term prospects.

“We are only a few weeks into the second quarter and have continued to see positive net new asset inflows” the bank said in the statement. “We have noted that political uncertainties have weighed somewhat on client volumes in the first few weeks of April. The outcome for the quarter will be dependent on political developments that are hard to predict at this stage.