Credit Suisse restructures its investment and private bank

Credit Suisse is merging its asset management business with its private bank in an effort to speed up cost savings, the bank said yesterday.

Three top bankers are quitting as a result of the changes: Osama Abbasi who is Asia-Pacific chief executive; Fawzi Kyriakos-Saad, chief executive of Europe, the Middle East and Africa (Emea); and Walter Berchtold, chairman of private banking, who is leaving Credit Suisse after 30 years with the Zurich-based bank.

Abbasi took charge of Asia in 2010 and is credited with helping strengthen the firm’s equities business in the region. He will stay with the bank for a brief period to assist with the transition in Asia, said a source.

Credit Suisse named Gael de Boissard to co-lead its investment bank alongside Eric Varvel, the current investment bank chief.

De Boissard will continue to lead the fixed-income business and will also take control of Emea. Subject to regulatory approval, he will also become chief executive of the UK entities Credit Suisse International and Credit Suisse Securities (Europe). He will join the executive board as of January 1.

Varvel will continue to head equities and advisory, and will also head the Asia-Pacific region. However, the bank also appointed veteran Southeast Asian dealmaker Helman Sitohang to a new role as head of the investment bank for Asia-Pacific.

Hans-Ulrich Meister will continue to head private banking in Switzerland, Emea and Asia-Pacific, while Robert Shafir, who previously headed asset management, will head private banking and wealth management in the Americas. The investment banking securities platform in Switzerland will be moved into private banking and wealth management, as well.

Credit Suisse said the new structure makes it “one of the first global investment banks that is in alignment with the new regulatory reality”.

“We have transitioned to the new capital regime, substantially reduced risk-weighted assets, balance sheet size and expenses, and we have rebalanced resources towards our higher-returning businesses,” said Urs Rohner, chairman of the board of directors of Credit Suisse in a statement.

“The changes announced today are a stepping-up of our strategy. They will better align product development, advice and distribution and they will further reduce complexity across the bank for the benefit of all our clients and stakeholders. We are convinced they will help us focus on our strengths in our chosen businesses and markets globally. The new structure will create one of the world’s leading integrated wealth management businesses and one of the first global investment banks that is in alignment with the new regulatory reality.”

Brady Dougan, Credit Suisse’s chief executive, added: “We have restructured our investment banking model resulting in a high returning, lower risk, client oriented business. Our private banking model is highly scalable and suited for the new regulatory environment. And we have sharpened the focus of our asset management business.”

The rise of Helman
Closer to home, Sitohang, who is based in Singapore, assumes the role as head of the investment bank for Asia-Pacific on top of his current role as chief executive for Southeast Asia and co-head of the bank’s emerging markets council.

“As far as I know, Credit Suisse is now the only international investment bank with a Southeast Asian in such a role, which is a reflection of the importance the firm places on the sub-region,” said a source.

He will join the investment bank operating committee and remain on the Asia-Pacific management committee.

Sitohang is known for building Credit Suisse’s Indonesia franchise, which some competitors snipe at, saying it includes clients they couldn’t bank — but nearly all would like to book the revenue from that powerhouse business.

A memo announcing his appointment stated: “During his 14-year career with Credit Suisse, Helman has worked on landmark transactions across asset classes and products, and has been involved in over $100 billion of M&A, financing and capital raising across the globe.”

Varvel added separately: “Helman and I first met in the late 1990s in Asia and I look forward to working with him to building out new markets and supporting new clients.”

This means that Vik Malhotra, who had been co-head of investment banking with Sitohang while Abbasi was CEO of Asia-Pacific, now reports to Sitohang regionally and Jim Amine functionally. Amine is head of the investment banking department globally. Malhotra's title is head of the Asia-Pacific investment banking department, and his appointment is effective immediately.

Different approaches
UBS announced last month that in addition to cutting 10,000 jobs it was closing its fixed-income trading businesses.

As one competitor put it, UBS’s announcement was “managing upward” — convincing regulators in Switzerland, as well as London, that it was serious about shrinking its balance sheet, which would allow it to maintain a lower capital ratio. And it was sending a message that it was serious about keeping risk in check. UBS amassed losses of $52 billion during the height of the global financial crisis.

Keep in mind that UBS announced its cuts during the court case of “rogue trader” Kweku Adoboli, who was accused of fraud after racking up losses of $2.2 billion. The case served as a reminder that trading is a risky business indeed. Adoboli was found guilty of two counts of fraud yesterday and was sentenced to seven years in prison.

After UBS made its announcements, heads turned towards Credit Suisse — with the obvious thought bubble over peoples’ heads asking: “What will they do?”

Switzerland, after all, was showing no signs of backing its major banks in the event of another global downturn, and Credit Suisse was in a similar position to UBS after expanding its investment banking and trading operations.

In late October, Credit Suisse said it would target an extra $1.1 billion of cost savings by 2015 after its third-quarter net profit shrank by more than half. This was in addition to an earlier cost-cutting target of $1.1 billion. The bank now says it expects to save a combined $4.3 billion by 2015, partly from previously announced layoffs of 3,500 workers, as well as reportedly selling prime Swiss real estate, but obviously also from additional cuts. On November 9, the bank said it would merge its retail and private banking arms in Switzerland, which would lead to 300 jobs cut in Switzerland alone.

Both UBS and Credit Suisse say they will focus on the more profitable private banking business, in a return to their roots.

That sounds good. But it remains to be seen if the Swiss banks can have their cake and eat it — can they continue to service the needs of newly wealthy Asian entrepreneurs while also reducing their investment banking footprint? Or will those clients give their private banking business to the universal banks who are helping them build their businesses?