Credit Suisse appoints new CEO to overhaul investment bank as losses mount

The logo of Swiss bank Credit Suisse is seen at a branch in Zurich, Switzerland November 3, 2021. REUTERS/Arnd WIegmann/File Photo

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ZURICH, July 27 (Reuters) – Credit Suisse Group (CSGN.S) has named asset management boss Ulrich Koerner as CEO, who is tasked with cutting investment banking and further cutting back billion-dollar costs to help the bank recover from a series of scandals and losses.

The Swiss bank has called 2022 a “transition” year with a changing of the guard, a restructuring aimed at reducing risk taking in investment banking and a strengthening of wealth management, while fending off speculation that it could be acquired or dismantled. Read more

A new strategic review announced Wednesday, the bank’s second in less than a year, will assess options for its securitized products business to attract third-party capital, while reaffirming its commitment to asset management. Read more

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

Koerner led UBS Asset Management (UBSG.S) from 2014 to 2019 and was an advisor to the CEO from 2019 to 2020. He was also previously a senior executive at Credit Suisse Financial Services and led the Swiss business.

Gottstein had a tumultuous two-year tenure punctuated by massive losses and even condemnation for the bank, and a 40% drop in his stock. Read more

The stock hit a low below 5 francs in mid-July and its market capitalization fell below 14 billion Swiss francs, according to data from Refinitiv. Shares were little changed at 09:00 GMT on Wednesday.

Credit Suisse “will need time to resolve its issues and regain the trust of all stakeholders over the next few years,” Vontobel analyst Andreas Venditti wrote in a client note. He said the investment banking review was the right target for Koerner.

On Wednesday, the bank announced a loss of 1.59 billion Swiss francs ($1.65 billion) from April to June, much larger than the market consensus of 206 million francs.

“Our results for the second quarter of 2022 are disappointing, particularly in investment banking, and were also impacted by an increase in litigation provisions and other adjusting items,” Gottstein said.

The investment bank, which lost 1.12 billion Swiss francs before tax in the second quarter, is expected to lose money again this quarter before business picks up again by the end of the year.

“It’s a radically different investment banking environment this year compared to last year,” Chief Financial Officer David Mathers said on a conference call.

As part of the investment banking overhaul, David Miller and Michael Ebert will become co-heads of the business, while current chief Christian Meissner will focus on strategic review.

In wealth management, Credit Suisse ranks among the top 2 global wealth managers outside the US, according to data from McKinsey.

REVISION

The bank’s latest plans call for cutting its cost base to less than 15.5 billion francs in the medium term from an annualized 16.8 billion this year based on first-half figures.

He said he would provide more details on how to proceed with the third quarter results.

The bank has previously said it aims to drive cost savings forward, accelerating measures introduced as part of its reorganization in November targeting 1.0 to 1.5 billion francs in annual structural cost savings from here 2024.

He also said that an IT overhaul could generate some 800 million francs in savings in the medium term, including 200 million francs for each of the years 2022 and 2023. read more

Chief Financial Officer Mathers said on Wednesday that the cost reduction would cover the whole group, not just IT. He gave no details of the job cuts.

The bank’s key capital ratio is now 13.5% of risk-weighted assets, in line with its short-term target, versus market expectations of 13.6%. It is below its 2024 target by more than 14% and 13.8% in the first quarter.

“I’ve been a CFO for 12 years and I had much, much, much lower capital ratios than that in my career, so it’s still one of the highest capital ratios,” Mathers said. , noting a CET1 capital in the second half of the target ratio of 13% to 14% in an uncertain environment.

SCANDALS

The bank is tightening controls after suffering billions in losses due to risk management and compliance mistakes. Read more

Two hits – a $5.5bn loss on the default of US family office Archegos Capital Management and the closure of $10bn of supply chain finance funds linked to the collapse of UK financier Greensill – assaulted the bank in March 2021.

Last month, Credit Suisse was found guilty of failing to prevent money laundering by a Bulgarian gang of cocaine smugglers in Switzerland’s first criminal trial against one of its major banks. He is appealing the verdict. Read more

Its Swiss rival UBS on Tuesday reported a lower-than-expected second-quarter profit of $2.1 billion as turmoil in financial markets hurt its investment banking and wealth management businesses. Read more

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Reporting by Michael Shields and Maria Sheahan; Editing by Christopher Cushing and Jane Merriman

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