Credit Suisse Boss Rewrites the Bank's Master Plan

(Bloomberg Opinion) -- Thomas Gottstein indicated that he didn’t plan to change much when he was promoted to the top job at Credit Suisse Group AG earlier this year. It’s a company he knows well, having worked there for two decades. But a reappraisal of the Swiss lender’s complexity and its appetite for risk appears to have changed his mind. That’s no bad thing.

According to Bloomberg News, Gottstein wants to combine the lender’s risk and compliance units, and to reunite the global markets and investment banking divisions that his predecessor split. The overhaul may be announced on Thursday. Credit Suisse is also weighing whether to streamline its international wealth-management business, undoing a structure put in place just two years ago. So much for not messing with things.

With the pandemic upending entire industries, the world of banking has changed since Gottstein took over as chief executive officer in February. Losses from bad loans, an accelerated shift to digital banking and a squeeze on margins from rock-bottom interest rates will force financial firms to focus ruthlessly on where they’re strongest, and to hunt for new ways to cut costs.

The new boss’s shift in direction reflects the new reality, but it’s also a judgment on Credit Suisse’s trajectory under his predecessor, Tidjane Thiam, who was ousted after a corporate spying scandal.

Credit Suisse wouldn’t be the first bank to split and then recombine its investment banking and trading units again. Deutsche Bank AG did the same in 2017. Bringing the trading operations and advisory activities back under one roof will make it easier to cut expenses and simplify businesses. The current structure adds unnecessary layers of management, creates competition for clients between bankers in different departments and gets in the way of the swift execution of deals.

At present, the bank runs an international capital markets division, a global markets unit and has trading and advisory activities that report into its other operating units. That has made measuring performance difficult from the outside.

Gottstein’s plan to tighten controls by combining the risk and compliance departments is perhaps even more revealing of his concerns about the bank. Yes, it’s an opportunity to reduce duplication, but the bank has also been wagering on risky deals that could damage its reputation and business.

Two clients — Luckin Coffee Inc. and Wirecard AG — have been embroiled in scandals. A margin loan to Luckin’s founder prompted an internal review of how the bank lends to billionaire clients — an important part of its expansion under Thiam — including loans backed by illiquid assets. Credit Suisse has also been looking at its supply-chain finance funds (used by companies to pay their suppliers) amid accusations of conflicts of interest over its links to a key investor in the funds, Masayoshi Son’s SoftBank Group Corp.

Under Thiam, Credit Suisse cut costs and reduced its exposure to volatile trading revenue. But there were concerns about whether its private banking business would be of the requisite quality to strengthen the franchise. Gottstein’s early moves suggest there’s room for improvement. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.

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