Credit Suisse unveils new plan, structured products unscathed

Credit Suisse Group has announced a restructuring of its business model which will see a radical revamp of its investment banking activities as well as an ‘accelerated cost transformation’, and the strengthening and reallocation of capital to build upon its wealth management and Swiss Bank franchises, and its product capabilities in asset management and markets.

The new Executive Board is focused on restoring trust through the relentless and accountable delivery of our new strategy - Ulrich Körner, CEO

The bank remains committed to its equity derivatives and structured products activities which will leverage the connection with the Markets business and will continue to be housed under its Investor Products franchise, SRP has learned.

Credit Suisse remains a top player in the global retail structured products market although it has seen its footprint reduced over the last nine months –it finished second in the global issuers ranking for 2021 with almost 15,000 products launched worth an estimated US$31 billion; YTD Credit Suisse has reduced its issuance and sales by half (7,903 products/ US$15.2 billion).

The Swiss bank has more than 10,530 live products worth an estimated US$31 billion.

The ‘radical restructuring’ of the investment bank over the next three years is aimed at significantly reducing Risk Weighted Assets (RWAs) and will position CS First Boston as an independent capital markets and advisory bank.

While remaining fully committed to serving institutional clients, the bank’s trading capabilities in cross-asset investor products as well as equities, FX and rates access will be closely aligned with the wealth management and Swiss Bank franchises.

Tailored solutions

This alignment will enable the bank ‘to provide tailored solutions to clients’ and differentiate itself ‘from other pure-play wealth managers’. These changes are also expected to enable the Markets division which will also support the newly created CS First Boston, to reinforce its position as ‘a solutions provider to third party wealth managers’.

The investment bank’s capital markets and advisory activities will lead to the creation of CS First Boston, which aims at being ‘more global and broader than boutiques, but more focused than bulge bracket players’.

Credit Suisse is also seeking to reduce its cost base by 15%, or CHF ~2.5 billion, to CHF ~14.5 billion in 2025 and release capital from ‘exits and significant exposure reduction for Securitized Products’.

The bank said an exclusivity agreement has been reached with an investor group led by Apollo Global Management to transfer a significant portion of the its Securitized Products Group (SPG) which is expected to strengthen the CET1 ratio alongside other divestments.

Under the terms of the proposed transaction, investment vehicles managed by affiliates of Apollo and PIMCO would acquire the majority of SPG’s assets from Credit Suisse and other related financing businesses from Credit Suisse, enter into an investment management agreement to manage the residual assets on Credit Suisse’s behalf, hire the SPG team to the new platform and receive certain ongoing services from Credit Suisse in order to maintain a seamless, high-touch experience for clients.

In addition, Credit Suisse will create a Non-Core Unit (NCU) to accelerate the run-down of non-strategic, low-return businesses and markets, to release capital; and will allocate almost 80% of capital to Wealth Management, Swiss Bank, Asset Management and Markets units by 2025.

Management reshuffle

As the Swiss bank embarks in its new strategy, Michael Klein will step down from the Board of Directors, which he joined in 2018, to act as advisor to Group CEO Ulrich Körner (pictured), helping launch CS First Boston. Klein will join CS First Boston in 2023 as its CEO pending regulatory approvals. During this transition period, David Miller will continue in his current role as global head of investment banking & capital markets, reporting directly to Körner, and supporting the establishment of CS First Boston as an independent bank.

In addition, Mike J. Ebert and Ken Pang will co-head the Markets business, effective from 1 November 2022, reporting directly to Körner. Ebert currently serves as co- head of the investment bank and co-head of global trading solutions; while Pang currently serves as co-head of global trading solutions and co-head of the investment bank for the Asia Pacific (APAC) region.

Christian Meissner, who has served as CEO of the Investment Bank and member of the Executive Board since 2020, has decided to leave the bank, effective immediately.

The Swiss bank has also announced the appointment of Louise Kitchen as head of compensation recovery unit (CRU). She will report directly to chief financial officer Dixit Joshi. Kitchen joins from Deutsche Bank where she served as head of the capital release group. Prior to that, Kitchen held a number of other roles at the bank including the head of institutional & treasury coverage, head of strategic implementation and head of commodities structuring and sales. Before joining Deutsche Bank in 2005, she worked for UBS Group.

‘The new Executive Board is focused on restoring trust through the relentless and accountable delivery of our new strategy, where risk management remains at the very core of everything we do,’ said Körner.

Credit Suisse will continue to implement its ‘cultural transformation, while working on further improving’ its risk management and control processes across the entire bank, said Axel P. Lehmann, chairman of the board of directors of Credit Suisse.