Credit Suisse announced plans for a “comprehensive” review of its businesses that would shrink its investment bank, as the troubled Swiss lender installed Ulrich Körner as chief executive and fell to a much larger loss than second quarter than expected.
Körner, who heads Credit Suisse’s asset management business, will take over from Thomas Gottstein, who is stepping down after leading the bank through one of the most tumultuous periods in its 166-year history.
The strategic review, the bank’s second in less than a year, would reduce the importance of the investment bank and significantly cut costs, Credit Suisse said on Wednesday.
“Our goal must be to become a stronger, simpler and more efficient group with more sustainable returns,” said chairman Axel Lehmann.
The bank posted a net loss of 1.6 billion francs ($1.7 billion) in the second quarter of 2022 after revenue fell 29 percent compared to the same period a year earlier. The loss was significantly higher than analysts expected of 206 million francs.
Credit Suisse’s investment bank posted a loss of 1.2 billion francs in the second quarter as revenue fell by a third in both fixed and equity sales and trading. The lender said it expected a loss at the investment bank in the third quarter.
The bank said David Miller and Michael Ebert would lead the investment bank, while the unit’s chief executive, Christian Meissner, would focus on its strategic transformation. The Financial Times reported on Tuesday that Meissner planned to leave the group.
Pre-tax income from the wealth management business fell 74% to 114 million francs compared to the previous year, while income from the asset management division fell 25% .
“Our results for the second quarter of 2022 are disappointing, particularly in the investment bank, and were also impacted by higher litigation provisions and other adjustment items,” said Gottstein, who added that he was leaving ” for personal and health-related considerations”. .
Credit Suisse set aside 434 million francs in provisions for litigation and said up to $200 million was related to US regulatory investigations into the use of personal messaging tools to communicate with customers. Several Wall Street banks have set aside an amount similar to the $200 million fine JPMorgan paid over the matter last year.
Credit Suisse issued a profit warning last month, the bank’s third of the year, saying market volatility had set back its recovery. He also said he would accelerate cost-cutting measures.
The bank said it will report on the findings of the strategic review in its third-quarter results in October. He said this would include significant cost reduction, from around 17 billion francs to 15.5 billion francs in the medium term, which would be achieved through cost efficiency and digital transformation.
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However, analysts were skeptical about the bank’s ability to meet cost-cutting targets.
“We should see more details about the plan, [for example] how much of the savings is related to the transformation of the investment bank, before giving Credit Suisse the benefit of these planned cost savings, as we believe the bank must also continue to make investments, particularly in technology,” said Kian Abouhossein, an analyst at JPMorgan.
Shares in Credit Suisse hit a three-decade low this month and, at SFr5.14, are down more than 40 percent this year. Shares were up 1.5 percent in mid-morning trading Wednesday.
Most recently, Körner and Lehmann were executives at Credit Suisse’s arch-rival UBS. Körner was brought in to head Credit Suisse’s investment arm immediately after the collapse of Greensill Capital, which led the Swiss lender to close $10 billion in funds last spring.
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