November 28, 2023

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Credit Suisse to slash 9,000 jobs, hive off investment bank in radical overhaul

Credit Suisse is set to cut 9,000 jobs and hive off its dealmaking unit as it unveils a radical overhaul of its business in an attempt to turn it around after successive scandals and billions in losses.

The Swiss bank said it is cutting 2,700 jobs in the final quarter of 2022 and will reduce employee numbers by 9,000 by the end of 2025 as it looks to strip out CHF2.5bn ($2.5bn) in costs in its long-awaited strategy shift. This is around 17% of its 52,000 employees.

Credit Suisse will also revive its First Boston name — the US-based investment bank it acquired in 1990 — as it separates its dealmaking unit from the rest of its investment bank. The name, which revives echoes of its pre-crisis pomp, means a shift to the US for Credit Suisse’s investment bank, which has been bleeding talent over the past 18 months, and a move towards so-called ‘capital light’ activities such as M&A advice. It will also seek external capital for its leveraged finance business and be led by former Citigroup dealmaker Michael Klein.

Alongside expectations of $2.9bn in restructuring costs by 2024, Credit Suisse expects to generate 14% of overall revenue from its new First Boston investment bank by 2025.

READ Credit Suisse’s debt drama worsens banker exodus: ‘Turnover is awful’

The investment bank more broadly will bear the brunt of a fresh cost-cutting programme, which will see 40% of its risk-weighted assets taken out as Credit Suisse places more emphasis on its more successful wealth management unit. This will be hived off into a new capital release unit, also known as a ‘bad bank’, as it separates its business into three key divisions — the investment bank, a capital release unit and the rest — as it winds down $35bn in assets.

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The bank will raise around $4bn in fresh capital to fund the overhaul, it said in a statement announcing the changes, led by investors including the Saudi National Bank, which has a 9.9% stake.

Credit Suisse has also reached an agreement to sell the majority of its prized securitised products unit to a consortium of investors led by private equity group Apollo Global Management and asset management group PIMCO. This was earlier reported by The Wall Street Journal.

The fresh overhaul comes around a year after Credit Suisse outlined a new strategy for its business under former chief executive Thomas Gottstein. Credit Suisse has been rocked by successive scandals including a $5.5bn hit from the collapse of family office Archegos Capital in March last year — a far bigger loss than its rivals — and its ties to disgraced supply chain finance firm Greensill Capital.

Its strategy announcement comes alongside its third-quarter earnings, where it has posted a loss of $4bn — far higher than the $434m loss expected by analysts. Credit Suisse’s losses for 2022 now stand at $5.9bn, with its investment bank slipping to a $640m loss in the third quarter as dealmaking slumped and the bank reduced risk in its trading business.

Credit Suisse hired former Deutsche Bank treasurer Dixit Joshi as its new chief financial officer earlier this month. Joshi was central to a radical overhaul by the German lender in 2019, which planned to cut around 18,000 jobs. Credit Suisse has also hired Louise Kitchen, who previously ran Deutsche’s bad bank, to head up its capital release unit as part of a series of executive changes.

READ Credit Suisse names new investment bank leaders after Welter quits for Citigroup

Christian Meissner, the former Bank of America executive who is chief executive of its investment bank, is leaving with immediate effect. David Miller, global head of capital markets and advisory, will remain in his role and report directly to chief executive Ulrich Körner as it creates CS First Boston. Meanwhile, dealmaker Klein, who joined Credit Suisse’s board in 2018 and who has been instrumental in setting the new investment bank strategy, will step down from the board to head up CS First Boston.

Mike Ebert, currently co-head of Credit Suisse’s investment bank and Ken Pang, head its Asian investment bank and co-head of its trading business, will lead its new markets business. Credit Suisse will now look to derive around 50% of its trading revenue from its wealth management clients.

In July, Credit Suisse installed Körner as its chief executive, replacing Gottstein who departed after a tumultuous two years in charge. Körner promised a fresh review of Credit Suisse’s business, overhauling a previous strategy shift outlined less than a year ago.

Gottstein took over from Tidjane Thiam, who exited Credit Suisse in the wake of a spying scandal in which the bank surveilled its own employees. Meanwhile, Sir António Horta-Osório, its chair brought in to turn the bank around in 2021, resigned after just eight months in January following repeated breaches of Covid-19 protocols.

Credit Suisse’s investment bank has consistently dragged it into the red and its latest results are the fourth straight quarterly loss. It has battled a flurry of departures from its advisory business and its credit trading unit and has disposed of business lines including its beleaguered prime services division.

Credit Suisse’s investment banking business has remained key to its strategy, despite the broader pullback from trading. It has added around 70 managing directors within its dealmaking unit, largely replacing senior bankers who have departed for rivals. It has struggled to stem an exodus of senior talent, with its head of European investment banking, Jens Welter, departing for Citigroup in December. Employees at the Swiss bank have increasingly been targeted by other banks in recent months ahead of job cuts, Financial News has reported, despite spending CHF289m on retention bonuses for key staff in the third quarter.

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To contact the author of this story with feedback or news, email Paul Clarke