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Credit Suisse to cut investment bank in wealth-led restructuring

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ZURICH: Credit Suisse Group AG will shrink its investment bank and shift more resources to the wealth management unit as part of a restructuring intended to draw a line under a tumultuous year in which it was rocked by the Archegos Capital Management and Greensill scandals.

The bank, based in Zurich, is exiting most of its prime services business after the implosion of Bill Hwang’s family office and shifting about US$3bil (RM12.46bil) of capital from the investment bank to the private bank.

The bank is also reorganising into four divisions and said that it will create a single wealth unit, as reported earlier this week by Bloomberg. Chairman Antonio Horta-Osorio has spent the past six months conducting a root-and-branch review of Credit Suisse after disastrous risk lapses wiped out billions in profit, plunged the bank into crisis and led to an overhaul of top management.

He stopped short of a radical overhaul of the bank, while investing in the more stable wealth unit and paring businesses that hurt the bank the most in recent years.

“Risk management will be at the core of our actions, helping to foster a culture that reinforces the importance of accountability and responsibility,” Horta-Osorio said in the statement.

The new strategy, “should enable us to achieve sustainable growth together with substantially lower risk and to deliver lasting value for all our key stakeholders.”

The bank is further simplifying its once-complex structure of overlapping businesses into four global units, wealth management, the investment bank, the Swiss bank and asset management.

That removed in particular the regional autonomy that Asia had enjoyed under former chief executive officer Tidjane Thiam.

Credit Suisse will add 500 relationship managers over the next three years and exit 10 markets that it sees as non-core as part of the wealth management strategy.

On the other side, the investment bank is following larger rival UBS Group AG in further pivoting to businesses that use less capital, such as advising companies on mergers and acquisitions.

It also plans to focus on businesses where it has top positions, such as in leveraged finance and credit, while reducing other areas and markets.

The bank updated several goals and created several new ones. It is targeting a return on tangible equity – a key metric of profitability – of greater than 10% by 2024, compared with an earlier medium target of 10% to 12%.

It is also aiming to distribute 25% of profit in 2022, after suspending its share buyback earlier this year.

Since taking over in April, Horta-Osorio has focused on rebuilding the ranks of the risk division, after failures led to the departure of former risk and compliance head Lara Warner.

Recent hires include David Wildermuth from Goldman Sachs Group Inc as chief risk officer and Rafael Lopez Lorenzo as chief compliance officer.

He has also tapped former UBS Group AG executive Axel Lehmann to head the board of directors’ risk committee and ex-chief risk officer at Lloyd’s Banking Group Juan Colombas for a seat on the board.

Colombas previously served under Horta-Osorio as chief risk officer at Lloyds from 2011 to 2020. — Bloomberg