When Ulrich Koerner unveiled a plan to salvage Credit Suisse Group in October, the chief executive officer promised to create a new bank.

His subsequent failure to reverse a stampede of client funds has raised doubts that “new” means “better”.

Credit Suisse lost an unprecedented 111 billion Swiss francs (S$160 billion) worth of assets during the three final months of last year, most of which departed in the run-up to the big strategy announcement on Oct 27.

Yet the bank ultimately reported almost 30 billion francs more in outflows by the end of 2022, despite a frantic campaign to call tens of thousands of wealthy clients around the world. 

Plans for the carved-out investment bank under ex-Credit Suisse board-member Michael Klein remain vague, and the outflow tide means the core wealth management business has a smaller base from which to earn profits.

While the overhaul started in October is, on paper, a three-year process, Thursday’s (Feb 9) results show the urgency of the situation facing Koerner and chairman Axel Lehmann.

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It’s unlikely that investors will wait that long without results before demanding an even more radical solution.

“The bank really needs to focus on regaining trust now and continue with that initiative to reach out to all of their clients,” said Andreas Venditti, an analyst at Vontobel bank in Zurich.

“But if this doesn’t work and revenue doesn’t come back up, then they will need a plan B.”

While there’s no indication yet that Credit Suisse is working on an overhaul of its overhaul, alternative ideas have floated around for years.

The lender has previously considered divesting parts or all of its Swiss unit as well as its asset management arm, and it could make yet deeper cuts to its investment bank or even shutter entire divisions.  

When Deutsche Bank was in similarly dire straits a few years ago, it took the drastic step of chucking out the entire equities trading unit.

It also stopped paying dividends for two years and ended up cutting about 7,000 jobs.

While the restructuring, which officially ended at the beginning of this year, is widely seen as successful, it owes much to the tailwind it received from a global trading boom and, more recently, rising interest rates.

Credit Suisse’s low share price may again begin to attract rivals interested in a takeover.

Zurich nemesis UBS Group and Deutsche Bank have both war-gamed the idea in recent years, Bloomberg has previously reported.

The challenges faced by Koerner to prevent any such scenario from unfolding are steep.

While he has persuaded a few clients to bring their money back, many are reluctant and some are probably gone for good, notwithstanding the bank’s massive outreach campaign and “competitive” prices, he said on Thursday.

When analysts and journalists kept pressing him on how many would ultimately return, he pretty much shrugged his shoulders.

The client-funds flight has crushed assets under management, with Credit Suisse saying it expects income from lending and fees to decline as a result.

That has put it on track for a “substantial” pre-tax loss this year, it said.

While Koerner held on to a previous pledge to be profitable in 2024, on Thursday he stressed the execution of the revamp plan and the “long-term attractiveness” for the bank’s shareholders.

Last year was billed as a year of transition to a more profitable Credit Suisse, a label that’s now also being applied to 2023. 

Sliding creditworthiness threatens to exacerbate the situation, with ratings firm Moody’s saying that the outflows “pose additional challenges” to Credit Suisse’s turnaround strategy.

The rating downgrades that have already happened since the revamp announcement have made it more expensive to raise funds, hampered its efforts to sell its products, and complicated its attempts to keep clients on board, the bank has said. 

Meanwhile staff are likely frustrated by Koerner’s decision to slash by half an already diminished bonus pool.

That will make it even harder for Credit Suisse to stem the exodus of staff it has been suffering for some time, though it has taken measures such as adopting a “transformation award” to address the issue. 

“Credit Suisse’s new strategy will take time to bear fruit while execution risks linger, exacerbated by tough markets,” said Alison Williams, Bloomberg Intelligence banks analyst.

“Uncertainty remains, including asset-disposal proceeds and related profit, and the structuring of a CS First Boston investment-banking carve-out. Legal issues and regulatory scrutiny persist in the wake of Archegos, Greensill, tax-evasion probes and legacy residential mortgage-backed securities cases.”

On the positive side, the bank has made some headway on cost cuts, making about 2,000 staff redundant in the past quarter, putting it on track to meet its 2025 goal of eliminating 9,000 roles.

It also said it has already initiated the overwhelming majority of the expense cuts it wants to achieve this year. 

Work continues on the pivotal plan to carve out the volatile investment bank into the revived brand of Credit Suisse First Boston, though the size, cost base and revenue outlook of this unit remain unclear.

While the bank hasn’t yet found its desired anchor investor for that unit, the search may be aided by installing proven dealmaker Klein as its chief executive. 

And according to executives, there are signs that client funds have started to return after the beginning of the year.

That indicates “management actions are reducing market uncertainty, which is paramount to the business’ ultimate turnaround”, S&P Global analyst Anna Lozmann said.

The last three months have shown that the timetable for the revitalisation of Credit Suisse isn’t likely to conform to Koerner and Lehmann’s plans even if they implement as promised.

“Management is delivering on everything they said they would do,” said Kian Abouhossein, head of European bank equity research at JPMorgan Chase & Co in London.

“The issue remains: The deterioration of the franchise is faster than expected both in respect to wealth management and the investment bank.” BLOOMBERG