Credit Suisse plans to scale back its investment bank under new chief executive Ulrich Körner, as the troubled lender battles to return to profit and reverse a slump in its shares.
The Swiss bank on Wednesday installed Körner, who has run its asset management business since March, 2021, to replace Thomas Gottstein, who is stepping down after leading the 166-year-old institution through one of the most tumultuous periods in its history.
As part of a series of sweeping changes, Credit Suisse launched a “comprehensive” review of its businesses that will focus on shrinking its unprofitable investment bank and making significant cost cuts across a company that employs 45,000 people.
“Our goal must be to become a stronger, simpler and more efficient group with more sustainable returns,” said chair Axel Lehmann.
Körner, who worked with Lehmann when they were both at the bank’s Swiss rival UBS, faces the twin challenge of reviving profits without risking more of the scandals that have beset the lender in recent years.
The plans for a strategic review — the lender’s second in less than a year — came as its second-quarter results underlined the damage investment banking was doing to its bottom line.
The investment bank fell to a SFr1.2bn loss in the quarter as revenues dropped by a third in both fixed income and equity sales and trading. The lender said it expected a loss in the investment bank in the third quarter.
The lacklustre performance at the investment bank contributed to an overall net loss for the quarter of SFr1.6bn ($1.7bn) after revenues dropped 29 per cent compared with the same period a year earlier. The loss was significantly higher than the SFr206mn analysts had expected.
Credit Suisse said David Miller and Michael Ebert would run the investment bank, while the unit’s chief executive, Christian Meissner, would focus on its strategic transformation. The Financial Times reported on Tuesday that Meissner was planning to leave the group.
Its wealth and asset management divisions, which Credit Suisse has been trying to grow, failed to offset the weakness in the investment bank. Pre-tax income in the wealth management business dropped 74 per cent to SFr114mn compared with a year earlier, while revenues in the asset management division were down 25 per cent.
“Our results for the second quarter of 2022 are disappointing, especially in the investment bank, and were also impacted by higher litigation provisions and other adjusting items,” said Gottstein, who added that he was leaving “for personal and health-related considerations”.
The findings of the strategic review will be announced alongside its third-quarter results in October. Credit Suisse said they would include a significant cost reduction, from about SFr17bn to SFr15.5bn in the medium term, which would be achieved through cost efficiencies and digital transformation.
Credit Suisse’s shares hit a three-decade low this month, and are down more than 40 per cent this year. The shares were up 1.5 per cent in early afternoon trading on Wednesday.
However, analysts were sceptical about the bank’s ability to hit the cost-cutting targets.
“We would need to see further details on the plan, [for example] how much of the savings is related to investment bank transformation, before giving Credit Suisse the benefit of these planned cost savings as we believe the bank also needs to continue with investments in particular in technology,” said Kian Abouhossein, analyst at JPMorgan.
Körner was brought in to head Credit Suisse’s investment arm in the immediate aftermath of the collapse of Greensill Capital, which led the Swiss lender to close $10bn of funds last spring.
Credit Suisse on Wednesday also set aside SFr434mn of provisions for litigation, and said up to $200mn was in relation to US regulatory investigations into the use of personal messaging tools to communicate with clients. Several Wall Street banks have set aside a similar amount to the $200mn fine JPMorgan paid over the matter last year.
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2022-07-27 07:41:13Z
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