By Vincent Flasseur and Davide Barbuscia
(Reuters) - Credit Suisse (SIX:CSGN) Group AG is set to announce a major strategic overhaul on Thursday after a string of losses and risk management failures have put the embattled Swiss lender under investor scrutiny.
Switzerland's second largest bank could face a capital shortfall of up to 9 billion francs ($9.10 billion), analysts have estimated, depending on how much it raises from sales of parts of its business and on what it does to slim down its investment bank.
Graphic: Credit Suisse in numbers - https://graphics.reuters.com/CREDITSUISSEGP-REVAMP/zjvqjqwxlpx/chart.png
The lender hopes its reorganization plan, details of which are expected with third-quarter results on Oct. 27, will reassure investors after shares tanked earlier this month by as much as 11.5% amid concerns about the bank's ability to revamp its business without asking for more money.
Graphic: Credit Suisse goes off piste - https://graphics.reuters.com/CREDITSUISSEGP-REVAMP/lbpggrokepq/chart.png
Credit Suisse Chairman Axel Lehmann, who pledged to reform the bank, said its capital base was strong. The stock price has roughly halved in value this year.
Graphic: Credit Suisse valuation concerns - https://graphics.reuters.com/CREDITSUISSEGP-REVAMP/byprlokzmpe/chart.png
So far, questions about the bank's restructuring, and whether or not it will need fresh capital to fund it, remain open. Investors earlier this month added to bets that Credit Suisse's shares still have further to fall, with increases in the amount of the bank's stock borrowed by investors reflecting a spike in so called "short selling" or "shorting" of the shares.
Graphic: Credit Suisse short bets soar - https://graphics.reuters.com/CREDITSUISSEGP-REVAMP/akveqgogovr/chart.png
Concerns about the bank's finances had seen some of its bonds tumble to record lows earlier this month and lifted credit default swaps (CDS), instruments used to hedge against default, to historic highs in the week starting Oct. 3.
A 3 billion francs bond buyback announced on Oct. 7 gave some reassurances to investors, and the cost of insuring exposure to the bank's debt has come down in recent weeks. On Wednesday it was close to levels seen before the early October market rout.
Graphic: Cost of insuring Credit Suisse debt - https://graphics.reuters.com/CREDITSUISSEGP-REVAMP/znvnbdkyevl/chart.png
($1 = 0.9891 Swiss francs)