Credit Suisse Merges Investment Banking Division and Other Key Changes

Credit Suisse (CSGN.S) CEO Thomas Gottstein wants to cut costs by 2% to 3% each year, he said in an interview published on Saturday, with savings put back into the bank’s business.

“Basically, like in the automotive industry, we want to be 2-3% more efficient every year,” he told Swiss newspaper Finanz und Wirtschaft.

With costs of around 17 billion Swiss francs ($18.63 billion), this meant around 400 million francs in annual savings, he said after Credit Suisse announced an overhaul of its investment bank and beat profit forecasts in its results on Thursday.

“We look at where there are duplicates and inefficiencies that can be remedied without compromising,” said Gottstein, citing the example of merging the risk and compliance functions.

The rest of the savings would come from other group-wide functions, as well as its business in wealth management, Asia, and reducing the branch network in Switzerland.

Credit Suisse’s Second Quarter Results

Credit Suisse posted on Thursday a 24% jump in second quarter net profits despite COVID-19 market volatility and “continued geopolitical difficulties.” 

Income attributable to shareholders rose to 1.2 billion Swiss Francs ($1.3 billion) versus 937 million Swiss Francs ($1 billion) last year, beating Bloomberg analyst estimates.

On strong trading performance, the bank’s net revenues jumped 11% to CHF 6.2 billion ($6.7 billion) for the second quarter.

Fixed income sales and trading revenues rose 151% year-on-year helped by emerging market rates, credit, and foreign exchange products.

Credit Suisse set aside CHF 296 million ($323 million) as a provision to cover bad loans related to the coronavirus crisis in the second quarter, in addition to the CHF 913 million ($1 billion) announced in April.

Structural Changes

Under his first overhaul of the bank, Credit Suisse will merge it’s trading and investment banking division and combine its risk and compliance functions with effect from August 1. 

The move is aimed at technology integration on a client-centric global platform.

From 2022 onwards, the bank aims to generate savings of about 400 million Swiss Francs ($437 million) – to allow for reinvestment and growth initiatives – through the integrated platform. 

Among the structural changes, the bank promoted Brian Chin to head its investment banking division and said David Miller would step down from the executive board. Chin was previously the bank’s head of global markets.

Credit Suisse’s Future

Looking ahead, Gottstein said the bank’s M&A business was only seeing a slow pick-up in activity, but he expected high market volatility to continue which was good for the bank’s trading business.

“I am also convinced that the capital market will continue to be active. Companies have to refinance themselves, many through capital increases,” he told the newspaper.

“And as far as private banking is concerned, we were able to increase sales in the first half of the year by 4% and even currency-adjusted by 7%, which is very solid in this environment. So I’m a little more optimistic here.”

“With higher digitisation and automated processes, we can basically get even more out of it. However, we will reinvest all of these savings in the business,” said Gottstein, who took over as CEO from Tidjane Thiam in February.