Zurich Credit Suisse wants to leave the permanent crisis behind with a shrunken investment bank, a capital increase worth billions and extensive job cuts. This was announced by the second largest Swiss bank on Thursday in Zurich.
“This is a historic moment for Credit Suisse,” said CEO Ulrich Körner. “We are fundamentally transforming the investment bank to create a new bank that is simpler, more stable, and whose business model is more customer-centric.”
The new strategy, on which CEO Körner has been working together with the Management Board team since taking office at the end of July, envisages, among other things, splitting the investment bank into four parts. The M&A and IPO advisory business is to be spun off under the CS First Boston brand. External investors should be able to participate in the new division.
The profitable securitization business (Securitized Products Group) will also be opened up to external investors. The majority will be sold to a consortium led by private equity firm Apollo and asset manager Pimco.
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In addition, Credit Suisse is establishing a so-called Capital Release Unit, a bad bank, with which the institute intends to process high-risk securities held off the balance sheet. Finally, trading in stocks, foreign exchange and bonds remains as the rest of the gutted investment bank. This should be geared more closely to the needs of wealthy private customers in asset management.
The aim is to distribute 80 percent of the capital employed between asset management, the Swiss universal bank and business with professional clients (asset management) by 2025. The fresh money needed for the restructuring of the group is to be raised through two capital increases totaling four billion francs. In the course of one of the two capital increases, the Saudi National Bank has become a major shareholder in Credit Suisse.
Almost six billion Swiss francs burned
In addition, the Swiss bank is intensifying its savings efforts: Körner has set the target of CHF 14.5 billion as the new cost basis for 2025. The head of the bank wants to save a billion more than previously planned. In the first half of the year, the bank’s total costs were around CHF 16.8 billion. This is to be achieved, among other things, by massive job cuts, from currently around 52,000 to 43,000 in 2025.
Axel Lehmann, chairman of the bank, called the plan a “radical strategy and a clear implementation plan to create a stronger, more resilient and more efficient bank, focused on our customers and their needs”.
The figures for the third quarter, which were also presented on Thursday, show how necessary the restructuring of the group is: from July to September this year, the pre-tax loss was 342 million Swiss francs (344 million euros). In the same quarter of the previous year, a pre-tax profit of CHF 1 billion was posted.
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“The third quarter and the year to date in 2022 have been significantly impacted by the ongoing difficult market and macroeconomic conditions,” said Körner. This led to weaker results, particularly from the investment bank. There was a pre-tax loss of CHF 666 million.
The net loss, which includes the costs of restructuring the group, even amounted to four billion francs. In total, Credit Suisse burned CHF 5.9 billion in the current year. The CET1 ratio fell 0.9 basis points to 12.6 percent compared to June, below the target range of 13 to 14 percent.
More: Credit Suisse division for securitized products to go to Apollo and Pimco