Credit Suisse has set out plans to raise 6 billion Swiss francs ($6.3 billion) from investors, slim down its investment bank and cut jobs as new chief Tidjane Thiam detailed the biggest overhaul in almost a decade at the Swiss bank.
Credit Suisse is emphasising wealth management and growing in Asia, echoing moves by rival UBS, and joins rivals including Barclays and Deutsche Bank as well as UBS in scaling back investment banking as tougher regulations squeeze profitability.
Mr Thiam, 53, hired from insurer Prudential in March and who officially joined in July, also said he will float shares in its domestic Swiss bank, as he set out his vision for Switzerland’s second-biggest bank almost four months into the job.
Chairman Urs Rohner had said in March Mr Thiam's appointment did not signal a major shift in strategy.
But the new CEO, a former Ivory Coast government minister who replaced American Brady Dougan, said weak quarterly results underscored the Zurich-based bank’s need for change. Third-quarter pretax income fell 34 per cent to 861 million francs, primarily reflecting an 8 percent drop in net revenue.
“That should validate in a way the strategy and confirms some of the insights that have guided us,” Mr Thiam said. “The ambition in this strategy is to grow fundamentally. To grow and to resolve the capital issue for good.”
Analysts noted the cash call was in line with expectations, but was countered by the weak results.
"We see today's announcement to shrink the investment bank, attack the cost base in earnest and simplify group structure will, over time, drive value creation," said Huw van Steenis at Morgan Stanley. "But a weak Q3 in FICC (fixed income, currencies and commodities) and heavier costs will clearly drag before Credit Suisse puts flesh on the skeletal new plan."
Credit Suisse shares fell as much as 4.5 per cent were down 2.9 per cent in early trading. Year to date the stock has dropped nearly 4 per cent against a rise of more than 11 percent for UBS, Reuters data show.
Focus
Mr Thiam said Credit Suisse would put more focus on managing the fortunes of the world’s wealthy, especially in emerging markets, will reduce the size of its investment bank and cut 2 billion Swiss francs in annual costs.
Mr Thiam, who spearheaded strong growth in Asia in his previous job at Prudential, said he wants to more than double Credit Suisse’s income from Asia to 2.1 billion francs by 2018.
He also aims to increase the bank’s international wealth management income by 62 per cent to 2.1 billion by 2018, and grow income in Switzerland by 44 per cent to 2.3 billion.
He plans to cut gross costs by 3.5 billion francs by the end of 2018 and will invest 1.5 billion francs in growth initiatives, to reduce the cost base to between 18.5 billion and 19 billion.
“The new strategy is very comprehensive and probably more than anticipated,” said one of the bank’s 20 biggest investors. But the investor said there was a lack of detail on revenue growth plans and said Mr Thiam needed to show how he will achieve his targets.
The bank will reduce the number of its staff in Switzerland by a net 1,600 over the next three years, and will cut the number of its investment bank staff in London. Mr Thiam estimated 1,800 of its London-based staff did not need to be in such a costly location.
It also aims to raise 1.35 billion francs from selling shares to a number of investors at 5.5 per cent below their price on Tuesday, and to raise a further 4.7 billion via a rights issue to existing investors.
The bank had been widely expected to raise between 5 and 10 billion francs, as it tackles a capital position which trails rivals and has been a persistent concern for investors.
Mr Thiam said the bank’s common equity capital adequacy ratio should rise to 12.2 per cent of risk-adjusted assets, and the bank aims to keep that ratio above 12 percent.
By comparison, UBS is one of the strongest capitalised banks in the world, with a common equity ratio of 14.4 per cent at the end of June.
The average for Europe’s 24 biggest banks was 13.2 per cent, lifted by high levels at Nordic lenders.
Mr Thiam also aims to streamline the bank by creating three geographic divisions: a Swiss universal bank, Asia Pacific, and International wealth management; and two investment bank units: global markets, and investment banking and capital markets.
Mr Thiam intends to reduce capital used by the investment bank, mainly in its “macro” businesses, which includes foreign exchange and rates trading products, and where the bank plans to reduce risk-weighted assets by 72 per cent by year end.
- Reuters
