Credit Suisse has unveiled a new strategy and transformation plan to create a “simpler, more focused and more stable bank built around client needs”.
The new strategy will see a radical restructuring of Credit Suisse’s investment bank, an accelerated cost transformation, as well as strengthened and reallocated capital.
The Swiss bank has revealed plans to significantly reduce the group’s cost base by 15% by 2025. To achieve this, Credit Suisse will adopt initiatives including non-core unit rundown and business descoping, organisational simplification, workforce management and third-party cost management.
In addition, a headcount reduction of 2,700 full-time-equivalent employees (FTE), which makes up roughly 5% of the Group’s workforce, is already underway as of Q4 2022. Credit stated that it expects to run the bank with 43,000 FTE before the end of 2025 compared to 52,000 at the end of Q3 2022.
Credit Suisse also said it intends to raise capital with gross proceeds of CHF4 billion through the issuance of new shares to qualified investors and through a rights offering for existing shareholders, subject to approval at the EGM. It also emphasised intentions to reallocate capital to its core, higher-return businesses.
The bank has revealed plans to restructure its Investment Bank and focus on areas more closely connected to its core business where it has a competitive advantage. Credit Suisse plans to achieve this by transforming the risk profile of the Investment Bank and targeting a reduction in Risk Weighted Assets (RWAs) of around 40% by 2025.
Credit Suisse has shared plans to create CS First Boston, a new firm led by the Investment Bank’s capital market and advisory activities. According to Credit Suisse, the new firm is expected to be more global and broader than boutiques, but more focused than bulge bracket players.
“This is a historic moment for Credit Suisse. We are radically restructuring the Investment Bank to help create a new bank that is simpler, more stable and with a more focused business model built around client needs,” said Ulrich Körner, chief executive officer at Credit Suisse, who was brought in earlier this year in a bid to save the struggling bank.
“Our new integrated model, with our Wealth Management franchise, strong Swiss Bank and capabilities in Asset Management at its core, is designed to allow us to deliver a unique and compelling proposition for clients and colleagues while targeting organic growth and capital generation for shareholders.”
Credit Suisse has had a difficult few years, with a substantial hit from the Archegos Capital Management disaster, accusations of money laundering for the Bulgarian mafia, and posting billions in losses for 2021. Moody’s downgraded its rating in August this year, and there have been rumours swirling around its ability to afloat, with Moody’s predicting losses to hit upwards of $3 billion this year. Credit Suisse reported around $1.92 billion losses for the first half of 2022.
Earlier this month, the Financial Times reported that the bank had been making calls to major investors reassuring them of its stability, following concerns around a possible collapse along the lines of Lehman Brothers following a spike in Credit Suisse CDS prices, with its stock dropping over 10% in consequence.