Credit Suisse will scale back its investment banking and focus on building its wealthy clientele, the Swiss bank said Thursday, as it regroups following a string of scandals.
The bank will shut down much of its blue chip brokerage business that dealt with hedge funds such as the bankrupt investment firm Archegos, instead injecting an additional 3 billion Swiss francs ($ 3.3 billion) into the bank. its private banking for the rich, which will be centralized in a global enterprise. .
âRisk management will be at the heart of our actions, helping to foster a culture that reinforces the importance of accountability and responsibility,â said President Antonio Horta-Osorio.
In the past year, Credit Suisse was fined for arranging a fraudulent loan in Mozambique, tarnished by its involvement with the late financier Greensill, racked up $ 5.5 billion in losses during the collapse d’Archegos and was reprimanded by regulators for spying on executives.
This has cast a cloud over the bank, sparked an exodus of key personnel and fueled speculation that the group, whose share price has languished, may even be bought by a rival.
The bank saw a 21% drop in third quarter profit and said it expected a fourth quarter net loss by writing off its investment banking related goodwill for a one-off charge of around $ 1. , 6 billion Swiss francs.
Credit Suisse plans to hire an additional 500 private bankers over the next three years, with the goal of having CHF 1.1 trillion in assets under management by 2024, up from the current 0.9 trillion.
It will simplify its structure into four divisions – investment banking, Swiss banking and asset management, in addition to wealth management, and four geographic regions – Europe, Middle East and Africa (EMEA), Asia-Pacific, Americas and Switzerland.
Thursday’s announcement is the first step on the path to a control of the bank chartered by Horta-Osorio, which took over in April as the bank grappled with the fallout from a reckless assignment.
The bank’s desire to centralize its operations draws lessons from some of its recent failures, including Archegos.
Earlier this year, Credit Suisse released a report accusing the focus on maximizing short-term profits and “greedy risk-taking” of Archegos for failing to pull the bank away from disaster.
The lean investment bank will focus on advising companies on transactions and quotes, and trading in spot stocks and other products of interest to its private banking clients.
It will reduce its emerging market lending, structured derivatives and other ânon-coreâ market activities, as well as its premium broking.
Despite longstanding discussions about Archegos – by far the bank’s biggest hedge fund client – Credit Suisse management was apparently unaware of the risks it was taking.
The bank’s chief risk officer and the director of his investment bank remember hearing about it for the first time only on the eve of the fund’s collapse.
Credit Suisse’s financial humiliation stands in stark contrast to that of its rival UBS.
Following massive losses and a bailout during the financial crisis, UBS has successfully transitioned from investment banking to wealth management and is now the world’s largest wealth manager with $ 3.2 trillion. dollars in invested assets, roughly three times that of Credit Suisse.