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(Bloomberg) -- Just when he thought the worst was behind him, Tidjane Thiam is facing another potential blow to a turnaround plan that’s less than two years old.

On Friday, Thiam’s Credit Suisse Group AG found itself facing a tax-evasion and money-laundering investigation spanning five countries that could involve thousands of account holders. It’s the latest headache for a CEO who may have to ask shareholders for a third capital raise in five years as the firm tries to recover from legacy issues and surprise trading losses.

Thiam is considering selling shares or pursuing a partial initial public offering of the firm’s Swiss unit as he tries to free up capital to expand wealth management in Asia while shrinking the investment bank. The CEO, who said in February that Credit Suisse’s $5.3 billion settlement with the U.S. over sales of toxic mortgage debt was a “game changer,” now faces the possibility of renewed uncertainty about the bank’s legacy issues.

“The problem for Credit Suisse is that they seem to be in the dark and have no idea what will result from this,” said Piers Brown, an analyst with Macquarie Group Ltd. who has an underperform rating on the stock. “The two things that people are fearing is a big fine and that this prompts another wave of outflows from their European business as clients get fed up with the franchise.”

The bank said its offices in London, Paris and Amsterdam were “contacted” on Thursday by authorities in connection with client tax matters, and that it’s cooperating. The move was so secret that not even Switzerland’s authorities knew about it. Investigators in the Netherlands arrested two people -- seizing a gold bar, paintings and jewelry -- and are probing dozens more suspected of hiding millions of euros in Swiss accounts, the Fiscal Information and Investigation Service said Friday.

Surprising Timing

Iqbal Khan, head of the unit that houses the wealth management operations whose offices were examined, said it’s too early to assess the impact on clients and the bank’s strategy won’t change.

“This whole action is something that does surprise me in terms of timing,” Khan said in a telephone interview Friday, pointing out that the inquiries were made public a day before the bank implements an automatic exchange of information with European authorities. “We’ve taken a proactive stance and zero tolerance when it comes to tax” evasion in Europe.

The bank repeated its “zero tolerance” approach in full-page advertisements taken out in U.K. newspapers on Sunday, giving a seven-bullet-point response to the probe. The bank added that it previously terminated relationships with clients who didn’t prove they paid their taxes, leading to “very significant asset outflows.”

Longstanding Plan

The raids come as the bank is considering asking shareholders for more than 3 billion Swiss francs ($3 billion) as an alternative to its longstanding plan to raise capital by listing part of its local unit, people familiar with the matter have said.

“It’s tight, but I believe they could do without” the IPO, David Herro, chief investment officer of Harris Associates, one of Credit Suisse’s top three shareholders, said early on Friday. “Raising capital must be something that’s done after a lot of careful thought.”

Herro, speaking to newspaper NZZ am Sonntag, said he’ll support proposals by the board of directors at the bank’s annual general meeting scheduled for later this month.

Credit Suisse fell 1.2 percent to 14.90 francs in Swiss trading on Friday, the second-worst performance in the Bloomberg Europe Banks Index. Its shares have climbed 2 percent this year.

‘No Good News’

The raids are not “good news but my gut feeling is that this is not a major case,” said Thomas Braun, a portfolio manager at BWM AG, which holds about 3.7 million shares in Credit Suisse. “The main question is whether these are current accounts or accounts of clients with which Credit Suisse canceled its relationship.”

It’s a question Khan said he couldn’t answer at this time. To his knowledge, the probes target individuals outside the bank, he said. No assets held at Credit Suisse were confiscated. If it turns out individuals inside the bank violated policies, there would be disciplinary action, though that’s too early to determine, he said.

Credit Suisse has reported more than 40 billion francs in outflows since 2011 from clients that moved to become tax compliant, Khan said. In Europe, those outflows are done, he said, though the unit expects about 5 billion francs from other regions this year.

Khan said he has no reason to change that guidance at this point.

Tax Obligations

Credit Suisse was fined $2.6 billion in 2014 after admitting it helped Americans cheat on their tax obligations and conducting what then-U.S. Attorney General Eric Holder called a “shamefully inadequate internal inquiry” into the wrongdoing.

In Europe, the bank agreed in October to pay about 109.5 million euros ($117 million) to Italian authorities to resolve a probe into the bank’s use of insurance policies allegedly designed to help clients evade taxes, five years after paying 150 million euros to settle a tax-evasion dispute with the German government.

“This leaves them in a difficult position” in case of a settlement, said Macquarie analyst Brown. “They’ve had a huge one in the U.S., and France is chasing UBS for a big sum, so the timing is poor,” especially given the discussions about a capital increase.

--With assistance from Hugo Miller and David Scheer

To contact the reporters on this story: Jan-Henrik Förster in Zurich at jforster20@bloomberg.net, Giles Broom in Geneva at gbroom@bloomberg.net, Stephen Morris in London at smorris39@bloomberg.net.

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Neil Callanan at ncallanan@bloomberg.net, Christian Baumgaertel

©2017 Bloomberg L.P.

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