Credit Suisse to absorb investment bank
Credit Suisse is to integrate its investment-banking unit, CSFB, into its private banking business, and will float insurance arm Winterthur on the stock market.
Switzerland’s second largest bank said on Tuesday that Credit Suisse First Boston would focus on niche markets as part of the reorganisation.
Analysts say CSFB has been slipping in the industry’s rankings and is no longer seen as one of the top five Wall Street players.
“Essentially this means there is now one group,” said a CS spokesman.
Analysts say CS Chief Executive, Oswald Grübel, is creating a more coherent group structure by cutting back areas that are struggling against competitors and investing in others where CS has an edge.
According to CS, the integration process could take up to two years.
In a statement, the company said the move would “better address client needs in a rapidly changing environment and make more efficient use of its resources”.
The CS group employs 60,000 people worldwide. Management said that the restructuring process was not expected to result in major job cuts or to require setting aside reserves.
CSFB head Brady Dougan said around 200 to 300 jobs might go at the investment bank. He said restructuring costs arising within the next 12 months would be compensated for by additional savings.
CS ruled out selling insurance arm Winterthur to a single buyer in favour of a stock market flotation. The bank bought the insurer in 1997 for $10 billion but no longer considers it core business.
“At this point in time, the market is not prepared to pay an adequate price for what CS believes is the full value of Winterthur.”
Credit Suisse also unveiled ambitious profit targets for CSFB, saying it was aiming for net income of SFr3 billion in 2007.
A reorganisation of CSFB has been widely expected since the unit’s boss, John Mack, was ousted in June as co-CEO of the group, leaving Grübel alone at the helm.
Last year, the biggest Swiss bank, UBS, underwent a similar revamp, absorbing its investment banks - PaineWebber and Warburg – into the parent, and ditching those brands to raise the profile of UBS.
Shares in the Credit Suisse Group rose on the announcement of the company reorganisation. In morning trading in Zurich they were up 1.9 per cent at SFr 45.85.
At the close, they finished up 4.33 per cent at SFr46.95 from Monday's close of SFr45.
In the past few weeks CS shares have benefited from rumours concerning the company’s restructuring.
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