Credit Suisse unveiled its long-awaited restructuring which includes the revival of the First Boston brand and a shrunken securitized products group.
Credit Suisse will pursue a new roadmap focused on creating a «simpler, more focused and more stable bank», according to the release of its much anticipated strategic update, resulting in «radical restructuring».
Over the next three years, Credit Suisse aims to significantly reduce risk-weighted assets via a restructuring of the investment bank and accelerated reduction of the group’s cost base by 15 percent, or around 2.5 billion Swiss francs ($2.54 billion), to 14.5 billion francs.
Major changes include the revival of the First Boston brand under a separate investment banking firm, the downsizing of the securitized products group (SPG) and the creation of a new capital release unit (CRU) to house SPG and other non-core businesses.
CS First Boston
16 years after first dropping the First Boston name from its investment banking business, Credit Suisse is reviving the brand under a new separate firm to house its capital markets and advisory activities.
Michael Klein will step down from the board of directors to become an advisor to group chief executive Ulrich Koerner to help launch CS First Boston. He is also expected to be appointed CEO designate of the new business in 2023, pending regulatory approvals. Meanwhile, David Miller will continue in his current role as global head of investment banking and capital markets, reporting to Koerner and also supporting the establishment of CS First Boston.
«The future CS First Boston envisions attracting third-party capital, as well as a preferred long-term partnership with the new Credit Suisse,» the bank said.
As expected, investment bank CEO and executive board member Christian Meissner has decided to leave the bank, effective immediately.
Capital Release Unit
Credit Suisse has also created a new capital release unit (CRU) which includes a non-core unit (NRU) with the purpose of releasing capital by winding down «non-strategic, low return and higher risk businesses» as well as the SPG. The unit will be headed by Louise Kitchen, most recently Deutsche Bank's head of the capital release group and group management committee member, reporting to chief financial officer Dixit Joshi.
On the SPG, the bank also announced today that it has entered an agreement to transfer a significant portion of the business to an investor group led by Apollo Global Management.
Under the proposed terms, investment vehicles managed by affiliates of Apollo and PIMCO would acquire the majority of the SPG assets and other related financing business from Credit Suisse. They will also hire the SPG team and receive certain ongoing services from the bank to ensure a smooth transition.
Markets Alignment
While Credit Suisse's markets business will continue to serve institutional clients, it will be closely aligned with the wealth management and Swiss banking units to provide tailored solutions, The markets arm will also support the newly created CS First Boston.
Mike J. Ebert and Ken Pang have been appointed as co-heads of the markets business, effective November 1, reporting to Koerner. Ebert is currently the co-head of the investment bank and co-head of global trading solutions (GTS) while Pang serves also as GTS co-head as well as co-head of investment banking in APAC.
9,000 Jobs Gone
In addition to efforts by the NCU to cut costs, the bank will also look to ax another 9,000 jobs by end-2025 with a headcount cut of 2,700 – or 5 percent of the workforce – already underway in the fourth quarter.
Other measures already in place include a 50 percent cut in consultancy spending and a 30 percent decrease in contractor spending with expectations for benefits to be realized in 2023.
Of the bank’s targeted reduction of 2.5 billion francs, 1.2 billion francs is planned for 2023.
Capital Plans
Aside from its SPG downsizing, other planned divestments as well as the reduction of risk-weighted assets and leverage, the bank will also strengthen its financial health with the issuance of new shares aimed to raise 4 billion francs of capital, subject to approval at the extraordinary general meeting.
Almost 80 percent of capital will then be allocated to Credit Suisse’s wealth management, Swiss banking, asset management and markets unit by 2025 with the goal of growing the revenue shares of these businesses to over 85 percent. The bank forecasts that CS First Boston will account for 14 percent of the revenue share by 2025.
