Questions raised over the new structure at Credit Suisse
As we reported yesterday, Credit Suisse has made some changes to its investment banking and capital markets division after appointing a new head, David Miller, in November. While the changes are ostensibly quite dramatic, some people are questioning whether they're really quite dramatic enough to reverse the fortunes of a business, which made a loss of CHF15m in the third quarter and had a cost income ratio of 106% in the first nine months of this year.
Fundamentally, the new structure is all about specialist global coverage and advisory groups.
In future there will be five big global groups: a group covering global industrials, global oil and gas, corporate insights and ultra high net worth clients, led by Harold Bogle; a group covering financial sponsors, leveraged finance and power and renewables, led by Malcom Price; a group that just covers financial institutions clients, led by Alejandro Przygoda; a group that covers healthcare, consumer and retail and Latin America, led by Robert Rankin; and a group that covers technology, media and telecoms, plus real estate, gaming and lodging, led by David Wah.
These are then supplemented by country coverage heads, by heads of individual subsectors (eg. consumer/retail/healthcare), and by product heads (heads of M&A, heads of DCM, heads of ECM etc).
In memos seen by eFinancialCareers, Miller and Jens Welter (EMEA head of IBCM) say the new structure is intended to deliver, "operational efficiencies and resource optimization," to "decentralize and accelerate decision-making and streamline processes," and to, "drive our business forward and position us to best capitalize on opportunities for growth."
Questions are being raised, however, about whether the reshuffling is a moving of the deckchairs rather than a ditching of the ballast. - Particularly compared to the far deeper changes that have taken place at Deutsche Bank in the past 18 months.
Credit Suisse declined to comment for this article. However, sources close to the bank suggest that the most notable thing about this week's shake-up is that the Swiss bank remains committed to all the sectors it's always covered. - While Deutsche has pared its sector coverage to focus on areas of strength, Credit Suisse is still playing on all pitches. This could be a mistake given that the bank has comparatively few strong sector teams in M&A aside from technology and healthcare in the U.S. and technology in EMEA. It's worth noting that Credit Suisse dropped off the ranking of the top 10 fee earners in EMEA for M&A in the first nine months of 2019, and that a strategy of doubling down on the best areas and withdrawing from the rest may have helped - but the bank doesn't seem ready for this, yet.
Eyebrows are also being quietly raised about the endurance of a lot of senior staff. While Miller might have been expected to come in and sweep out the old guard, many are still in place and the most that's happened seems to have been the conversion of a few existing MDs and heads of businesses into titulary chairmen roles. Miller now has no fewer than 16 direct reports and yesterday's memos name nearly 50 senior staff in coverage and product teams in IBCM globally and in EMEA alone. Although Miller's reports are understood to be less prolific than his predecessor Jim Amine's, that's still a lot of top dogs for a business with a profitability problem.
While banks like UBS are busy jettisoning co-heads to cut costs, Credit Suisse also seems to kept or created dual heads at the top of several business areas. Jonathan Grundy and Antonia Rowan are now co-heads of UK IBCB, a business previously run by Rowan alone. And the German business is now run by Joachim Ringer and Marc Schmidt, instead of Ringer alone. EMEA as a whole, however, is now run by Jens Welter alone instead of Welter and Mathew Cestar (Cestar is off to join Jim Amine), but Welter now has a new senior colleague in the form of Elodie Blanc, who was named his deputy rather than his co-head.
Credit Suisse has big plans for its IBCM business next year. At the bank's investor day earlier this month, CEO Tidjane Thiam said CS plans to invest in the franchise in the U.S. and EMEA and to implement "M&A-focused strategic initiatives to drive incremental revenues."
2020's pipeline has already "improved strongly," said Thiam earlier this month. Credit Suisse's bankers need to hope their CEO is right, otherwise the new structure may prove only temporary. In the meantime, the endurance of a lot of costly senior staff means bonuses for 2019 are very likely to be down, as flagged by Bloomberg in November.
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