The Swiss Credit Suisse tightens. The business areas are being rearranged and thousands of jobs will be eliminated. The conversion is financed by sales – and the entry of Saudi Arabia.
The crisis-plagued Credit Suisse is radically reorganizing its business. In the future, the Swiss institute will focus more on business areas that are less susceptible to fluctuations, such as wealth and asset management, and will withdraw from riskier businesses. For the restructuring, which is accompanied by massive job cuts, the bank raises money from investors and brings a Saudi bank on board as a major shareholder.
For the summer quarter, the bank shows a loss of billions due to depreciation and the start of restructuring. Also burdened by investment banking, the bank recorded a deficit of four billion francs. This included a value adjustment due to the strategy review of 3.7 billion euros, it said.
“The third quarter and the year to date in 2022 have been significantly impacted by the persistently difficult market and macroeconomic conditions,” explained CEO Ulrich Körner. “This led to weaker results, particularly at our investment bank.”
Once again, millionaires and billionaires withdrew assets from Credit Suisse. Net new money, which provides an indication of future earnings, was negative CHF 12.9 billion. The core capital ratio (CET1 ratio) deteriorated to 12.6 percent at the end of September from 13.5 percent at the end of June. So far, the bank had targeted a value of between 13 and 14 percent for the second half of the year and over 14 percent in the medium term.
For the realignment, the major bank is selling a significant part of the securitized products sector to the US financial houses Apollo and Allianz subsidiary Pimco, thereby further reducing investment banking. The institute also wants to part with other businesses. Credit Suisse is also creating a Non-Core Unit to accelerate the winding down of non-strategic and low-margin businesses. In the future, almost 80 percent of the capital will be allocated to wealth management, Swiss banking, asset management and the markets business.
First of all, the conversion costs money: the bank expects charges of 2.9 billion francs by the end of 2024. This is to be partly financed with money from a capital increase. The bank wants to take in 4 billion Swiss francs. The Saudi National Bank will invest CHF 1.5 billion and thus acquire a 9.9 percent stake in Credit Suisse. The bank intends to reduce costs to CHF 14.5 billion by 2025. By the end of 2023, they are expected to fall by 1.2 billion. As part of the restructuring, the traditional Zurich group is cutting 2,700 jobs in the current quarter. By 2025, the number of employees is to be reduced to around 43,000 from around 52,000 most recently.
Credit Suisse has to reposition itself after various scandals that are eroding the bank’s reputation. The collapse of the Archegos hedge fund and its exposure to Greensill Bank cost Credit Suisse billions. A new head of the board of directors and a new management had announced drastic changes in July.
