Credit Suisse Plans Investment Bank Trims Rather Than Teardown
(Bloomberg) -- Credit Suisse Group AG’s planned changes at the investment bank will focus on further cuts to the prime brokerage business at the center of Archegos Capital Management scandal, with the wider division escaping the drastic changes some had feared, according to people with knowledge of the matter.
The Swiss bank, which has already said that it will slash lending to hedge funds by a third or $35 billion, will announce plans to further reduce capital at the unit and a fresh round of job cuts as it seeks to move away from balance-sheet intensive areas where it doesn’t believe it can compete with Wall Street firms, said the people, who asked not to be identified discussing the plans before they were announced.
The bank presents its long-awaited strategy review on Thursday as it seeks to draw a line under one of the most tumultuous years in its recent history after the Archegos and Greensill scandals hurt the bank’s reputation, wiped out more than a year of profit and prompted an exodus of talent at the investment bank. Chairman Antonio Horta-Osorio had stoked speculation that wider changes might be to come at the securities unit after he signaled that it was a service business to the wealth-management division.
A Credit Suisse spokesman declined to comment.
The lender is said to be planning job cuts at the division, though these will be less than 500, one of the people said. Overall, the unit employs about 17,500 people.
Chief Executive Thomas Gottstein has been telling investment bank staff that they’ve been spared a massive slashing of their business, recently visiting the investment bank’s offices in New York, according to the people. The CEO has a background in investment banking. Even amid the tumult this year, the investment bank -- led by ex-Bank of America Corp. executive Christian Meissner -- has shown some areas of strength away from the Archegos hit.
Significant personnel changes aren’t expected across the bank, though Credit Suisse expected to name Francesco de Ferrari as the new global head of wealth management, which would combine the various private banking businesses in a unified structure. Philipp Wehle, who currently leads the international wealth business, is being considered for other roles. Meissner is set to remain as investment banking head.
The planned changes at the investment bank would continue the trend of shrinking that Credit Suisse and other rivals have pursued over the past decade. In 2018, Deutsche Bank AG CEO Christian Sewing decided to exit equities and other businesses where it felt it couldn’t properly compete with peers. UBS Group AG also drastically reduced the capital to its investment bank in the aftermath of the financial crisis.
Credit Suisse has previously said its competitive position is in M&A, institutional loans, cash equities, asset finance, leveraged finance trading, and macro products. The investment bank had seen a raft of departures after the Archegos scandal.
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