Credit Suisse Group AG announced Wednesday that it will raise approximately 6 billion Swiss francs ($6.3 billion) in new capital as part of a massive strategic overhaul.
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The bank said it would cut 1,500-2,000 jobs in Britain, 1,600 in Switzerland and 2,000 in the United States, mostly through attrition, but would expand a few other operations with new hiring. Revenues declined eight per cent to 5.98 billion francs.
Third-quarter pretax income fell 34% to Sf861m, primarily reflecting an 8% drop in net revenue.
He also intends to reduce the capital used by CS’s investment bank.
Credit Suisse is now in discussions with the Irish central bank about opening a regulated office in Dublin to relocate a few functions including prime broking, which provides services to hedge funds, to the Irish capital, according to a source familiar with the matter.
Thiam also aims to streamline the bank by creating three geographic divisions – a Swiss universal bank, Asia Pacific and worldwide wealth management – and two investment banking divisions – global markets and investment banking and capital markets.
Chief Executive Officer Tidjane Thiam, 53, who took over from Brady Dougan in July, will present a strategy update on October 21. “I’d be surprised now if they didn’t put the knife into the bone”, said Al Alevizakos, scaring young children and investment bankers everywhere. “Thiam was brought into the bank as CEO to downsize the investment bank, grow in Asia and better control costs”. After all, the huge equity issuance would represent a sizable dilution to investor holdings in the bank.
Following the announcements, Credit Suisse saw its share price plunge 4.70 per cent in mid-morning trading, as the Swiss stock exchange’s main SMI index was down just 0.67 per cent. Private Banking & Wealth Management offers a variety of financial solutions along with advice to corporate, private and institutional customers.
“Asia’s growth in the next five years may be not so good as it was over the last five years”, said an official at another top-20 investor in Credit Suisse, again speaking on condition of anonymity. Now Credit Suisse has CHF133 billion of client assets under management and in the first nine months gathered CHF14.7 billion of net new assets, representing 55% of the bank’s total Private Banking net new assets.
Investors expect Thiam to trim the investment bank to which Credit Suisse allocates around 60 percent of its leverage capital, according to Morgan Stanley analysts.
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Credit Suisse’s closest rival, UBS, is also making the most of its long-standing joint venture in China.
