Credit Suisse takes huge hit from hedge fund collapse (April, 2021)

ZurichCredit Suisse has named asset management boss Ulrich Koerner as its new CEO, who is tasked with scaling back investment banking and cutting more than $1 billion in costs to help the bank recover from a string of scandals and losses.

The Swiss bank has dubbed 2022 a “transition” year with a change of guard, restructuring aimed at curtailing risk-taking in investment banking, and bulking up of wealth management, while batting away speculation that it could be acquired or broken up.
A new strategic review announced on Wednesday, the bank’s second in less than a year, will evaluate options for its securitised products business to attract third-party capital, while reaffirming its commitment to asset management.

Koerner, 59, is considered a restructuring expert in Switzerland and will succeed CEO Thomas Gottstein on Aug. 1.

Koerner ran UBS (UBS) Asset Management from 2014 to 2019 and served as adviser to the CEO from 2019 to 2020. He was also previously a senior executive at Credit Suisse (CS) Financial Services and ran the Swiss business.

Gottstein has had a tumultuous two-year tenure punctuated by massive losses and even a conviction for the bank, and a 40% plunge in its shares.
The stock touched a low below 5 francs in mid-July, and its market capitalization has fallen below 14 billion Swiss francs, Refinitiv data showed. The shares were little changed Wednesday.

Credit Suisse “will need time to solve its issues and regain the trust of all stakeholders over the next years,” analyst Andreas Venditti at Vontobel wrote in a client note. He said the investment bank review was the right focus for Koerner.
On Wednesday, the bank reported a 1.59 billion Swiss franc ($1.65 billion) April-June loss, far deeper than the 206 million franc market consensus.
“Our results for the second quarter of 2022 are disappointing, especially in the Investment Bank, and were also impacted by higher litigation provisions and other adjusting items,” Gottstein said.
The investment bank, which lost 1.12 billion Swiss francs before tax in the second quarter, was expected to lose money again this quarter before business picks up by year’s end.
“It’s a radically different investment banking environment this year than it was last year,” Chief Financial Officer David Mathers told a conference call.
As part of the investment bank overhaul, David Miller and Michael Ebert will become co-heads of the business, while current chief Christian Meissner will focus on the strategic review.
In wealth management, Credit Suisse ranks as the top 2 global wealth manager outside the United States, based on McKinsey data.

Overhaul

The bank’s latest plans include cutting its cost base to below 15.5 billion francs in the medium term versus an annualized 16.8 billion this year based on first-half numbers.
It said it will give more details on how to do this with third-quarter results.
The bank has previously said it aimed to bring cost savings forward, speeding up measures introduced as part of its reorganization in November targeting 1.0 billion to 1.5 billion francs in annual structural cost savings by 2024.
It has also said an IT overhaul could generate some 800 million francs in cost savings in the medium term, including 200 million francs in each of the years 2022 and 2023.
CFO Mathers on Wednesday said cost-cutting would cover the entire group, not just IT. He gave no details on job cuts.
The bank’s key capital ratio is now 13.5% of risk-weighted assets, matching its near-term target, versus market expectations of 13.6%. It is below its 2024 goal of more than 14% and first-quarter 13.8%.
“I have been CFO for 12 years and I had much, much, much lower capital ratios than this in the course of my time so this does represent still one of the highest capital ratios,” said Mathers, noting a second-half CET1 capital ratio aim of 13% to 14% in an uncertain environment.

Scandals

The bank is tightening controls after suffering billions in losses via risk-management and compliance blunders.
Twin hits – a $5.5 billion loss on the default of U.S. family office Archegos Capital Management and the shuttering of $10 billion of supply chain finance funds linked to collapsed British financier Greensill – beset the bank in March 2021.

Last month, Credit Suisse was convicted of failing to prevent money laundering by a Bulgarian cocaine trafficking gang in Switzerland’s first criminal trial of one of its major banks. It is appealing the verdict.
Swiss rival UBS reported a smaller-than-expected $2.1 billion second-quarter profit on Tuesday, as financial market turmoil hurt its investment banking and wealth management businesses.
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