Credit Suisse tries a new CEO and new plan after mounting losses

CREDIT SUISSE Group replaced its embattled chief executive officer and said it would embark on a new turnaround plan just 9 months after the last one, as the Swiss bank indicated it aims to slash the size of its investment bank in the face of mounting losses.

The firm tapped asset-management head Ulrich Koerner to be CEO starting next week, replacing Thomas Gottstein, who is resigning after a 2-year tenure marked by scandal and huge losses. The firm, which posted a larger-than-expected 1.59 billion franc (S$2.3 billion) second quarter loss, said the review will include cutting at least another 1 billion francs of costs and evaluating its securitized products trading unit.

Chairman Axel Lehmann is seeking to steer the bank back to profitability - and stability - after scandals such as the blow-up of Archegos Capital Management and Greensill Capital eroded investor confidence, weakened key businesses, and prompted an exodus of talent. The Swiss lender has changed its entire executive team and half its board of directors in the past 18 months in an effort to move past the crises.

The firm has spent the past 3 years mired in scandals - starting with a spying fiasco that led to Gottstein taking the reins from Tidjane Thiam - that has left it floundering at a time when many rivals have seized on active markets to thrive. Now with inflation fears and the war in Ukraine spurring more turbulence, Credit Suisse losses have totalled almost 4 billion francs in the past 3 quarters.

Credit Suisse said in a statement Wednesday that it was “considering options for fundamentally reshaping” the investment bank, including attracting third-party capital for a securitized products trading business that’s typically profitable but uses about a quarter of the division’s capital. The firm said it wants an investment bank that uses less capital and is more tied to its wealth franchise, indicating possible deeper cuts than it laid out in a new strategy in November.

The investment bank’s revenue fell 55 per cent in the second quarter, driven by a slump in trading while rivals saw gains, and US$245 million in losses from its leveraged finance business. The firm guided that the pain at the investment bank is far from over, with third-quarter trading marked by continued weakness in client activity and another expected loss in that area. The firm named David Miller and Michael Ebert as co-heads to oversee banking and markets, saying current investment bank chief Christian Meissner will focus on transforming the business.

The bank also said it aims to cut its overall cost base to 15.5 billion francs in the medium term, well below the target of 16.5 billion to 17 billion francs it set out late last year.

Koerner, 59, has spent more than 20 years at the 2 largest Swiss firms. He spent over a decade at Credit Suisse before moving in 2009 to crosstown rival UBS Group, where he worked with Lehmann. Koerner rejoined Zurich-based Credit Suisse last year after losing out in a management reshuffle at UBS in 2019.

He’s now set to go from running the smallest of Credit Suisse’s 4 main units to trying to regain investor confidence, something Gottstein has struggled to do since a series of scandals last year. The company’s board held early-stage talks about replacing Gottstein as far back as May, Bloomberg News reported at the time.

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The second quarter loss was driven by declines at the investment bank and trading businesses and higher litigation expenses. The bank saw net outflows of 7.7 billion francs as clients traded less and cut risk in response to gyrating equity markets. BLOOMBERG