Credit Suisse has named Ulrich Körner as its new chief executive, ousting current boss Thomas Gottstein as the Swiss bank looks to recover from a series of scandals.
The Swiss bank is also set to embark on a fresh round of cost-cutting as it posted a second-quarter net loss of CHF1.5bn ($ 1.65bn) — far higher than the CHF205m predicted by analysts — and will overhaul its strategy outlined in November last year.
Credit Suisse plans to cut its cost base to CHF15.5bn, a reduction of around CHF1.5bn on its existing targets, and will scale back its sales and trading business as it focuses its investment bank on so-called capital light advisory functions. The bank will refocus on its wealth management unit “while considering options for fundamentally reshaping the investment bank,” it said in a statement.
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Körner rejoined Credit Suisse last year to run its asset management business that had been rocked by the Swiss bank’s links with disgraced supply chain finance firm Greensill Capital. He is Swiss and previously held senior roles at rival UBS including overseeing its asset management arm and as senior advisor to its former CEO. He will take over the top job on 1 August.
Gottstein is stepping down from the top job after around two years, having taken over from former boss Tidjane Thiam after the bank was embroiled in a scandal when it spied on its own staff.
Within its investment bank, Credit Suisse has elevated David Miller, its head of capital markets and advisory, and Michael Ebert, who has led held senior trading jobs at the Swiss bank since joining from Bank of America in 2017, as co-heads of banking and markets.
Christian Meissner, who is currently chief executive of Credit Suisse’s investment bank, will focus on the “ongoing strategic transformation of the business”, the bank said. A report in the Financial Times on 26 July said that Meissner was preparing the exit from Credit Suisse.
Meanwhile, the bank has elevated a number of senior executives into a new “ad-hoc investment bank strategy committee” led by Michael Klein, a board member who runs his own advisory boutique, as well as Mirko Bianchi, Richard Meddings and Blythe Masters.
Gottstein became chief executive in February 2020, shortly before widespread Covid-19 lockdowns, and has had to tackle a series of crises. Last March, Credit Suisse was forced to deal with both the collapse of Greensill Capital and family office Archegos Capital.
The Swiss bank took a $ 5.5bn hit from Archegos — far larger than any of its rivals — and has overhauled its senior management. Gottstein appeared to be one of the only survivors from the crises, with the bank insisting recently it was pushing through a new strategy unveiled in November 2021.
“It has been an absolute privilege and honor to serve Credit Suisse over these past 23 years,” Gottstein said in a statement. “Credit Suisse has formidable client franchises in all four divisions globally and an immense talent pool across more than 50,000 colleagues worldwide. “
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Körner said he was looking forward to “devoting my full energy to execute on our transformation”.
Within its investment bank Credit Suisse said it was looking to bolster its securitised products and leveraged finance unit, which has historically been a successful business for the Swiss bank. It utilises CHF20bn in risk-weighted assets and CHF70bn in leverage, and Credit Suisse said it has “untapped growth opportunities which may be best unlocked by attracting third-party capital, which would also free up additional resources to allocate to Credit Suisse’s growth areas”.
However, Credit Suisse’s investment bank is also likely to be a target for cuts. The bank has hired around 60 managing directors within its dealmaking unit, largely to replace around 70 senior bankers who have left for rivals, often luring them with expensive compensation packages and also offering retention awards to key investment bankers who have threatened to defect to rivals.
The unit slumped to a net loss of CHF1.1bn during the second quarter. While rivals have all posted significant declines in dealmaking fees from the start to the year in 2021, they have offset this with gains within their sales and trading units.
Meanwhile, its compensation costs within its investment bank are up by 11% to CHF2.1bn for the first six months of 2022. Rival Goldman Sachs has scaled back pay by over 30% so far this year while Morgan Stanley has cut compensation costs by 21 % within its investment bank.
Speaking to analysts during the bank’s second quarter earnings call, chairman Axel Lehmann said the bank would look at the “core strengths” of the investment bank, but would also “go rigorously after the cost base” within the unit.
“It’s a radically different investment banking environment this year than last year,” added David Mathers, Credit Suisse’s chief financial officer in response to a question on increasing compensation costs. “It doesn’t seem to me like it’s going to be as good a year for bonuses in 2022 as it was in 2021 for bonuses across the industry. “
Credit Suisse has already shuttered its prime services division, which was at the heart of its Archegos loss, and further cuts to its sales and trading business seem likely. Its fixed income unit fell by 42% in the second quarter to CHF600m, while equity sales and trading fees fell by 8% to CHF330m.
The bank’s capital markets bankers brought in just CHF38m in the second quarter, a decline of 96% on the previous year and the sharpest fall of any bank to report numbers so far. M & A fees of CHF183m were up by 44% on the prior year.
In the first six months of the year, Credit Suisse has made $ 1.1bn in investment banking fees, according to data provider Dealogic, a 56% decline and the largest fall of any top 10 investment bank. It has fallen behind Barclays to sit sixth in the league tables.
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