The lender has unveiled major structural changes, made a series of high-level appointments - and announced departures as it bids to improve profitability. The changes put more focus on Asia wealth management, which has seen assets grow this year.

(An earlier version of this news item appeared on WealthBriefing, sister news service to this one. Details on the Asian aspects of the announcement have been added to this report for the benefit of readers in the region.)

Credit Suisse today unveiled sweeping organisational structure changes, including a partial IPO of the bank serving its home market in Switzerland, a greater focus on emerging markets, especially Asia, and changes to its management line-up as the lender looks to boost profitability.

The changes, which are made up of three main elements, are the fruit of moves put into place under the recently-appointed chief executive Tidjane Thiam, who took over from Brady Dougan earlier this year. There has been speculation that the bank will shift its wealth management focus to regions such as Asia and trim its investment bank, thereby cutting demands on capital.

The bank said it is investing more capital and resources into the Asia-Pacific region, and that it was appointing Helman Sitohang, currently chief executive, Asia-Pacific, to the bank’s executive board. Credit Suisse also reported record results for Asia-Pacific, with revenues rising to SFr3 billion ($3.13 billion), up 17 per cent and pre-tax income is SFr1.1 billion, up 48 per cent, for the first nine months of the year. The bank said results were driven by “continued strong performances” across the bank in Asia-Pacific.
Credit Suisse Asia Pacific has now set a target to double pre-tax income and client assets under management in the region by the end of 2018.  Currently Credit Suisse in the region has SFr133 billion of client assets under management and in the first nine months gathered SFr14.7 billion of net new assets, representing 55 per cent of the bank’s total private banking net new assets.

Separately, in its third-quarter results, the entire Zurich-listed bank reported core pre-tax income of SFr861 million ($901.3 million), primarily reflecting lower results in investment banking due to unfavourable market conditions. Net income attributable to shareholders was SFr779 million, down 24 per cent compared to the same period of last year. Reported core net revenues decreased 8 per cent year-on-year, as lower net revenues in investment banking and private banking and wealth management were partially offset by higher net revenues in the corporate centre. In the non-strategic businesses, pre-tax income rose to SFr35 million compared to a loss of SFr321 million in Q3 2014.

At the end of the third quarter, Credit Suisse’s private banking and wealth management arm had total assets under management of SFr1.293 trillion, and SFr16.4 billion of net new assets; AuM declined by SFr4.6 billion from the previous three-month period. The cost/income ratio of this division was 75.2 per cent, up from 68.9 per cent in the previous three months.

Shares in Credit Suisse were down around 3.1 per cent at SFr24.10 per share in morning trade today (source: Bloomberg).

Big changes
Firstly, the Zurich-headquartered firm said it wants to boost its position in the domestic Swiss market by growing its Swiss universal bank model to become the “bank of choice for Swiss private, corporate and institutional clients”. Credit Suisse will develop “an efficient, integrated banking platform combined with a planned IPO” for this business.

Secondly, Credit Suisse said it will “scale up its private banking and wealth management franchise in the attractive markets of Asia, Eastern Europe, the Middle East, Latin America and Africa”. The bank said it will accelerate its growth in Asia-Pacific by allocating more capital to serve the wealthy entrepreneurs of this region via a dedicated, integrated APAC division. Further, it said that in other emerging markets, the newly established International Wealth Management division will replicate the “bank for entrepreneurs” Asia-Pacific model.

The final broad goal is to “right-size” the investment bank to support wealth management clients – boosting profitability and reducing the demands on capital and making earnings less volatile.

To obtain the capital needed for this strategy, the bank said, it announced a number of rights offerings and placings.

Structure changes
The bank said it will simplify the organisation from the previous matrix of two business divisions, each with co-heads, and four regions, into a bank that has three new, regionally focused divisions: Switzerland, Asia-Pacific and International Wealth Management serving Western Europe, Central and Eastern Europe, Latin America and Africa. Two other divisions – Global Markets and Investment Banking and Capital Markets (IBCM) – will sit alongside these regional businesses.

Credit Suisse said these operating businesses will be supported by a number of focused functions at group executive board level, including a newly established position of chief operating officer, given the role of making the bank into a more decentralised organisation. A new role of chief compliance and regulatory affairs officer is to be created.

Executive team
The bank has appointed six new members of the executive board: Pierre-Olivier Bouée, Peter Goerke, Thomas Gottstein, Iqbal Khan, Helman Sitohang and Lara Warner. All the functional heads will be based in Zurich.

Going forward, the composition of the executive board will be:

Tidjane Thiam - CEO

Thomas Gottstein - Swiss Universal Bank

Helman Sitohang - APAC

Iqbal Khan - International Wealth Management

Timothy O’Hara - Global Markets

James Amine - Investment Banking and Capital Markets

David Mathers - chief financial officer

Romeo Cerutti - general counsel

Joachim Oechslin - chief risk officer

Pierre-Olivier Bouée - chief operating officer

Lara Warner - chief compliance and regulatory affairs officer

Peter Goerke - human resources, communications and branding

Under the changes, Gaël de Boissard, Hans-Ulrich Meister, Robert Shafir and Pamela Thomas-Graham will step down from the board.

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Capital programme

The bank said it has a programme to cut capital allocated to investment banking activities, particularly through a significant reduction of the macro business (by 72 per cent in risk-weighted assets and 79 per cent in leverage between the second quarter of this year and end of 2015) and an optimisation of its prime business (by 50 per cent in RWA and 25 per cent in leverage over the same period).

There will be a number of closures and business disposals, Credit Suisse said, such as in the US and Western Europe.

“Service models in Western Europe will be adjusted to make our business more efficient. In the US, our domestic private banking business is not currently positioned to compete in scale without significant investment or acquisition. Given this limitation, the economics for Credit Suisse do not yet meet profitability criteria and, therefore, cannot achieve optimal returns for our shareholders relative to our alternatives,” it said.

Credit Suisse is shifting its current private banking brokerage business model to “better leverage” its investment banking and asset management capabilities for ultra high net worth clients in the US. The deal involves a transition to the advisory business of Wells Fargo.

“We have signed an exclusive recruiting arrangement to provide relationship managers and their clients in our US Domestic Private Banking business an opportunity to transition to Wells Fargo Advisors by early 2016. In addition, the two companies expect to strategically expand their relationship to make additional Credit Suisse investment banking and asset management offerings available to the Wells Fargo distribution network,” it said.

The bank said its total cost base is expected to fall by a net SFr2 billion to between SFr18.5 billion and SFr19.0 billion by end-2018. As part of the overall changes, up to SFr1.5 billion in invested in growth initiatives, the statement continued.

There will be a strategic resolution unit to oversee the effective wind-down of the bank’s portfolios that do not fit its strategic direction, including those in the current non-strategic units.

Planned IPO
Credit Suisse said the planned partial share float of a stake, at between 20 and 30 per cent, in its Swiss universal bank, will be held by the end of 2017, subject to the state of the market.

“A stand-alone public listing will bring a number of strategic advantages: it will (i) highlight the value of our Swiss franchise, which will enhance the value of Credit Suisse as a whole, (ii) exert market discipline to support the delivery of key growth and profit objectives and (iii) allow an easier consolidation of segments of the Swiss banking sector. Credit Suisse Group will retain control of the institution, which is the cornerstone of the business and at the heart of this new strategy,” it said.

Targets
Setting out some of its goals, Credit Suisse said it wants to more than double pre-tax income at its Asia-Pacific division from SFr900 million in 2014 to SFr2.1 billion in 2018; it wants to raise pre-tax income in International Wealth Management from SFr1.3 billion in 2014 to SFr2.1 billion in 2018; at the universal bank, it wants to raise pre-tax income from SFr1.6 billion in 2014 to SFr2.3 billion in 2018.

The capital raising should produce a pro-forma capital ratio of 12.2 per cent.