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Credit Suisse may cut investment bank, Deutsche Bank says
[ZURICH] Changes in how banks measure the risk of losses on their assets may lead Credit Suisse Group AG's incoming chief executive officer Tidjane Thiam to further shrink its investment bank, Deutsche Bank AG analysts said.
A "plausible scenario" is that he will shut down the government debt and foreign exchange business and put its securitization business up for sale to a US competitor, Matt Spick and Omar Keenan said in a note to investors Thursday.
Mr Thiam may also decide to scale back the Swiss bank's fixed-income business in emerging markets, they said.
Regulators are reviewing banks' ability to reduce their capital requirements by simply changing how they measure their risk-weighted assets. In December, the international Basel committee on banking supervision published draft plans to set a capital floor and reinforce standardised methods, part of a broader regulatory reform in response to the financial crisis.
The review will lead to an increase in risk-weighted assets at UBS Group AG and Credit Suisse, putting pressure on their capital ratios, a measure of financial strength, the Deutsche Bank analysts said.
Credit Suisse has been trimming its investment bank, cutting assets weighted by risk at the businesses the bank wants to keep by half since 2010. It aims to split risk-weighted assets at least equally between its money-managing businesses and the investment bank, the bank's chairman Urs Rohner said in March. The balance is currently skewed toward the investment bank.
Credit Suisse appointed Mr Thiam to succeed Brady Dougan in March. Mr Dougan will leave his post at the end of June, the bank said. The bank's shares are up 16 per cent since Mr Thiam's appointment, partly on speculation he'll make deep cuts to fixed-income trading.