2022 should be a “transition year”.
(Photo: Bloomberg)
Zurich Persistent problems in the operational business have forced Credit Suisse boss Thomas Gottstein to restructure the board: CFO David Mathers, chief lawyer Romero Cerutti and Asia boss Helman Sitohang have to give up their positions. Credit Suisse confirmed this on Wednesday. The “NZZ am Sonntag” and “Bloomberg” had previously reported on the restructuring of the board.
A successor for Cerutti has already been determined: As the bank further announced, Markus Diethelm will take over the post of chief legal officer. The manager headed the legal department of competitor UBS until November 2021. The bank has named Edwin Low, who is currently the regional co-head of the investment bank, as the successor to Asia boss Sitohang. It’s still unclear who will replace Mathers.
In addition, Credit Suisse has appointed Francesca McDonagh, who is currently CEO of the retail Bank of Ireland, to lead the Europe region. The position had previously been taken over on an interim basis by the head of asset management, Francesco De Ferrari.
Axel Lehmann, Chairman of the Board of Directors of Credit Suisse, said of the newly hired top managers: “They bring a wealth of experience and impressive track records in their respective fields, combined with the right risk mentality required to execute our strategic and… driving cultural transformation.”
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With the management restructuring, CEO Gottstein is reacting to renewed special charges in the billions. Last week, in a profit warning, the bank had to concede increased provisions for legal cases and write-downs on loans to Russia and investments amounting to CHF 1.2 billion.
Large net loss in the first quarter
Operationally, things are not going well for the bank either: the net loss of CHF 273 million was significantly higher than the analysts surveyed by the bank had expected in advance.
The bank had to spend an additional CHF 700 million on legal cases. In addition, write-downs on credit in the Russian business and higher risk provisions cost around 200 million francs. An impairment of the investment in asset manager Wealthfront was CHF 353 million, which was partly offset by the sale of real estate.
However, in addition to the special charges, the core business is also weakening: the assets under management fell by around four percent compared to the fourth quarter of 2021 to around CHF 1.55 billion.
The pre-tax profit of the bank’s most important division fell by 74 percent to 212 million francs. The division suffers from the fact that customers have withdrawn their assets. In addition, there are increased costs, including for new consultants that the bank hires for new growth in wealth management.
In investment banking, a loss of CHF 55 million was incurred: After the collapse of hedge fund customer Archegos, Credit Suisse is taking fewer risks and has withdrawn capital from the division.
Bond trading, in which the bank is traditionally strong, also fell significantly by 50 percent compared to the same quarter of the previous year. In the investment business with professional customers (asset management), the bank is also struggling with declining income. Only on the home market, in the Swiss universal bank, was the bank able to achieve what it considered to be a “solid result”.
CEO Gottstein had already dampened expectations at the beginning of the year and described 2022 as a “year of transition”. From 2023, his strategy with a focus on wealth management should bear fruit. The newly formed management team should help with this.
Apart from Gottstein himself and the head of the Swiss universal bank, André Helfenstein, none of the current board members was in his post before the collapse of the Greensill funds.
The list of tasks is long: in asset management, the bank wants to hire hundreds of new customer advisors and raise a total of CHF 200 billion in new money. In addition, the bank faces years of legal battles with customers who have lost money in the supply chain funds operated with Greensill.
More: Second profit warning in three months: Credit Suisse starts with a quarterly loss in 2022.