Credit Suisse will rein in its investment bankers and plough money into looking after the fortunes of the world’s rich as it tries to curb a freewheeling culture that has cost it billions in a string of scandals.
Announcing the restructuring on Thursday, Chairman Antonio Horta-Osorio, who joined from Lloyds Bank in April to bring the Swiss lender to heel, said he was putting risk management and responsibility at the heart of its operations.
Switzerland’s second-biggest bank will all but stop funding hedge funds by shutting most of its prime brokerage business, a division blamed for racking up $5.5 billion in losses when investment fund Archegos Capital Management defaulted in March.
The long-awaited reorganisation, however, fell short of the sweeping overhaul expected by some investors.
“It’s rather underwhelming. A bit of reshuffling, of reorganisation here and there, and a few exits,” said Jerome Legras of Axiom Alternative Investments. Analysts at Citi said it was a “modest restructuring” which relied on growth rather than cutting costs.
To further dampen the mood, the bank posted a 21 per cent fall in third-quarter profit and said it expected a loss in the final three months of 2021 as it writes off some 1.6 billion francs ($1.8 billion) of goodwill related to the investment bank.
The bank’s exit from prime broking cements its demise as a major player in the hedge fund industry.
In 2010, it was ranked the second-biggest prime broker in the world, outstripping the likes of US giants JPMorgan and Morgan Stanley.
But a succession of leadership changes and risk oversight branded as “lackadaisical” in an independent review culminated in the Archegos losses that triggered its downfall.
The trimmed down investment bank will focus on advising firms on deals and listings and trading cash equities. Credit Suisse will also cut back its lending in emerging markets.
The bank said the overall reorganisation would save it 1 billion to 1.5 billion francs by 2024.
Horta-Osorio emphasised the history of a national icon, which was founded to finance the construction of Switzerland’s pan-Alpine railways and has been central to the country’s transformation from a farming nation to financial powerhouse
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