Credit Suisse is trying to get its team excited about its new investment bank spinoff, CS First Boston by appealing to old traditions in the profession.
Former Credit Suisse board member and CEO-designate of spinoff CS First Boston Michael Klein (pictured below) addressed assembled colleagues yesterday at a town hall event they will all be shareholders in the «super boutique», according to a «Bloomberg» (behind paywall) report.
Klein, himself an investment banker, promised the new company would be profitable and that the bad bonus round seen at Credit Suisse this year will not be repeated, and all will profit as owners of the firm.
Split in this Year
Credit Suisse's investment bank which suffered a pre-tax loss of nearly $1.3 billion in the fourth quarter will be split into a trading division, the Swiss business, and CS First Boston.
Compared to the previous year, the risks on the balance sheet were reduced by 13 percent, but after $3.5 billion in pre-tax profits in 2021, a loss of $2.8 billion resulted in 2022.
(Image: Credit Suisse)
Super Boutique, Super Performance?
Investment bankers expect the environment for their business to improve in the second half of this year at the earliest, and there is still time before the spinoff is launched. Credit Suisse held out the possibility of a CS First Boston IPO for the end of next year. Nevertheless, the time seems short to get the super boutique into racing trim by then.
The bankers in Klein's audience have probably long since calculated that. Nevertheless, the chances are not bad that they will rally behind their future boss. Because as his performance shows, the Wall Street veteran knows which instincts to appeal to.
- Bonus prospects: Even in the era of «purpose» driven work, investment banking is still very much focused on monetary rewards like bonuses. Credit Suisse is all too well aware of this. In recent months, there have been repeated reports that the bank sought to retain key investment bank executives with monetary promises. It makes sense that compensation is not about the absolute amount, but the symbolic value in an industry where a high bonus means that work is valued.
- Skin in the game: Investment bankers are often regarded as mercenaries in pinstripes. But over the past twenty years, several investment banking boutiques have emerged, especially on Wall Street, which are partner-owned. Klein is seemingly channeling as a template for his super boutique. With that in mind, it's crucial that employees can participate in CS First Boston.
- Be the best: Successful boutiques are usually founded by veteran rainmakers with thick address books from which they draw their appeal. The status of working with the best rubs on others which can also lay claim to that mantle. Klein knows this mechanism well, having founded his boutique, M. Klein & Co, whose purchase by Credit Suisse came with a price tag of $175 million.
Already Cashing In
The fact that Klein his brother cashed in on this before even getting CS First Boston operational doesn't seem to bother the bank's management. CEO Ulrich Koerner has repeatedly backed Klein, and repeatedly said he is convinced Klein is the right man to lead the spinoff to success.
