Credit Suisse unveiled its long-awaited overhaul in a bid to turn the business around after two years of scandal, crises and billions in losses.
The result is a drastic scaling back of its investment bank, a retreat to its core wealth management division, and a $4bn capital raise, primarily from a Saudi Arabian investor.
In the immediate aftermath of the review, the bank’s share price fell by 13%. It’s down 50% so far this year. Here are the six takeaways you need to know about.
1. Job cuts harsher than anticipated
Credit Suisse was expected to cut thousands of jobs as it pulls back from trading functions and streamlines its investment bank around a so-called capital light, advisory-led model. Conservative estimates had put cuts at 10% of total headcount, or around 5,000 people. But Credit Suisse now plans to reduce staff numbers by 9,000 over the next three years — or 17% of its current workforce. It’s already started, and 2,700 will be stripped out by the end of this year.
In a call with journalists CEO Ulrich Körner said that he expects half of the reduction to come from “natural attrition” of employees departing.
2. CSFB reborn
Credit Suisse’s investment banking business is being hived off into a separate unit called CS First Boston, reviving the brand name of the US investment bank it acquired in 1990. While Credit Suisse plans to strip out $2.5bn in costs across the bank, its new advisory business is being touted as an area of expansion. Körner said it would create a “partnership culture” and bankers would be given potentially lucrative equity stakes in a bid to keep hold of talent.
“This has generated a lot of excitement among our investment banking colleagues as well as talent outside the bank,” he said.
Michael Klein, a former Citigroup dealmaker who reportedly helped hatch the plan to spin off the investment banking unit, will lead the division.
READ How Michael Klein could turn Credit Suisse around
3. Deutsche Bank’s turnaround crew tapped
Dixit Joshi, Deutsche Bank’s former treasurer who was instrumental in its 2019 overhaul, joined Credit Suisse as chief financial officer in October. It has also taken on Louise Kitchen, previously head of the German lender’s ‘bad bank’, as head of its new capital release unit.
The division will wind down around $35bn in unwanted assets at Credit Suisse, including what is left of its prime services unit — which was at the heart of a $5.5bn loss related to family office Archegos Capital — as well as riskier assets and unwanted business lines.
READ Credit Suisse names former Goldman Sachs exec Nita Patel as chief compliance officer
4. Sales and trading downsized
If dealmakers are being protected by the carve up of Credit Suisse, sales and trading staff are more likely to feel the brunt of cuts. The bank plans to reduce risk-weighted assets in the unit by 40% over the next three years.
5. Securitised products unit snapped up
In July, Credit Suisse executives outlined plans to open up its capital-hungry securitised products business to external capital, or hive it off from the bank entirely. It has now reached an agreement to sell the majority of the unit to an investor group led by Apollo Global Management.
6. Big losses mean urgent action
Credit Suisse unveiled a $4bn loss for the third quarter of 2022, far higher than analysts expected and the fourth consecutive three-month period in the red. The bank has lost nearly $6bn so far this year.
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To contact the author of this story with feedback or news, email Paul Clarke
