Credit Suisse weighs splitting China team in First Boston revamp

CREDIT Suisse Group is weighing a plan to carve up its investment bank in China by retaining a domestic unit and shifting the overseas operation to the new CS First Boston (CSFB) division, people familiar with the matter said.

The securities and wealth businesses in mainland China is likely to be kept under the Swiss lender, while Hong Kong staff focusing on offshore deals would be transferred to Credit Suisse First Boston, the people said, asking not to be identified because the matter is confidential.

Retaining domestic businesses would reduce the hassle of restarting a licence application for the revived First Boston brand. Credit Suisse is awaiting final approval to expand in China almost three years after it gained majority control of its joint venture with a local firm. The onshore securities unit would set up a service contract with the CSFB entity to split the profit on China deals worked on by both teams, one of the people said.

A spokesperson for Credit Suisse declined to comment.

Credit Suisse is spinning off its dealmaking operations under the storied First Boston moniker to focus on its wealth business as part of a massive restructuring following a series of scandals and billions in losses. The bank is buying Michael Klein’s advisory boutique and tapping the former Citigroup banker to revive the business.

The bank made deep cuts to its China workforce in November as part of the global overhaul, letting go at least a third of its investment bankers and about 40 per cent of research staff. Carsten Stoehr, chief executive officer for Greater China, quit last month, among the most senior departures.

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The discussion over splitting the China business is preliminary as the firm is currently focused on completing the deal to buy out its local partner. Credit Suisse First Boston is set to be a partnership, with key employees having some ownership. It’s unclear if the onshore China bankers will be granted shares in the new entity, one of the people said.

China’s regulator completed its on-site inspection of Credit Suisse’s onshore unit before the Chinese New Year, the final step before the bank can start building out its wealth management business and expand equities trading beyond Shenzhen, the people said.

Deal flows

The securities unit had 1.09 billion yuan (S$211.6 million) of capital and 237 staff at the end of last year. It’s currently allowed to underwrite domestic shares and bonds and operate brokerage services in southern China.

Credit Suisse ranked 8th in arranging Chinese stock sales overseas last year, down from 6th in 2020. The domestic securities unit recorded 45 million yuan of net profit in 2021, though net fee and commission income more than tripled to 240 million yuan, according to its filing.

As part of broader management changes, the bank named Edwin Low, former co-head of investment banking and capital markets, as CEO for Asia-Pacific. He had led the advisory division since 2015, working his way up after joining the firm in 1996. BLOOMBERG