Credit Suisse Extends Rally as Bidders Line Up for Key Unit

(Bloomberg) — Credit Suisse Group AG shares extended their rally to a third day after Bloomberg News reported that bidders are lining up for the bank’s securitized products unit, a key pillar in the downsizing of its investment banking operations.

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The stock rose as much as 3.7% to 4.61 Swiss francs and has rebounded 18% since plunging to a record closing low on Sept. 29. It’s still down 50% year-to-date.

Pimco, Sixth Street and an investor group including Centerbridge Partners are among a shortlist of bidders for at least part of the securitized products business, people with knowledge of the matter said, asking not to be identified because talks are private.

While the report is welcome news, there’s doubt over how much a sale might fetch, according to Vontobel analyst Andreas Venditti. Given market conditions and the fact that Credit Suisse is a “forced seller at the moment,” Venditti is “pretty sure they’re not going to get the highest bids one would wish for in this environment,” he said by phone.

A sale of the unit may provide an additional positive catalyst for Credit Suisse, which last week offered to buy back up to $3 billion of its own debt, in a move aimed at calming frayed investor nerves. Chief Executive Officer Ulrich Koerner is due to detail the bank’s second strategy overhaul in a year on Oct. 27, widely seen as a critical opportunity to restore faith in the lender after more than a year of losses and management missteps.

Venditti said he’s looking for “a realistic plan with a credible strategy” after announcements over the past two decades “never went far enough.” A potential solution could be to stretch the restructuring over a longer time period as costs would then be spread over time, he said.

As the bank tries to avoid what would be an expensive capital raising, it is also exploring the sale of the Mandarin Oriental Savoy Zurich, Bloomberg News reported last week.