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Credit Suisse to shrink investment bank

Keystone / Urs Flueeler

The Credit Suisse Group says it will shrink its investment bank and shift more resources to the wealth management unit.

This content was published on November 4, 2021 - 08:51
Bloomberg/db

It is part of a restructuring plan intended to draw a line under a tumultuous year in which it was rocked by the Archegos Capital Management and Greensill scandals.

The Zurich-based bank is exiting most of its prime services business after the implosion of Archegos and shifting about $3 billion of capital from the investment bank to wealth management, according to a CS statement on Thursday. The bank is also re-organizing into four divisions and said that it will create a single wealth management unit.

According to the Bloomberg financial news agency, chairman Antonio Horta-Osorio has spent the past six months conducting a root-and-branch review of Credit Suisse after disastrous risk lapses wiped out billions in profit, plunged the bank into crisis and led to an overhaul of top management. By shrinking the investment bank and shifting more resources to wealth management he’s seeking to move away from more risky activities in favor of more stable returns.

“Risk management will be at the core of our actions, helping to  foster a culture that reinforces the importance of accountability and responsibility,” Horta-Osorio said in the statement.

The bank updated several targets and created several new ones. The  bank is targeting a return on tangible equity - a key metric of  profitability - of greater than 10% by 2024, compared with an earlier  medium target of 10% to 12%. It’s aiming to distribute 25% of profit in  2022, after suspending its share buyback earlier this year.

Since taking over in April, Horta-Osorio has focused on rebuilding the ranks of the risk division, after failures led to the departure of former risk and compliance head Lara Warner.

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