Credit Suisse has been a Swiss investment banking leader for years. The seemingly endless departures are an indication the cards will soon be reshuffled.
The base of Credit Suisse's Swiss investment banking monolith is showing signs of crumbling which is particularly visible in its bond issuance business. After key departures to Deutsche Bank and J. Safra Sarasin, two executives are moving to BNP Paribas, finews.com reported.
It's a notable development for a business that maintained its market-leading position for years, having defied numerous internal reorganizations within the group. The cards in Swiss investment banking cards are being reshuffled, and large foreign investment banks are looking for a seat at the table.
Professional Uncertainty
Meanwhile, UBS has to ask itself how big it wants to become in the business considered the crown jewel of Credit Suisse.
The word around Credit Suisse is the 70-strong investment bank team, led by Jens Haas (pictured below), is keeping its feet planted and waiting for things to play out, but the uncertainty surrounding their futures is setting forces in motion. Entire teams have already left Credit Suisse's private banking in Switzerland for competitors, as reported by finews.com.
(Image: Credit Suisse)
UBS management under Group CEO Sergio Ermotti has given itself until the end of August to decide the Swiss business's fate, with integration the baseline scenario. No doubt will be handing out the jobs: UBS. The idea of a Credit Suisse platform operating as part of the UBS investment bank is evaporating quickly, although there's still hope some Credit Suisse rainmakers will remain.
Uneconomical Doubling
Research by finews.c0m shows it's not only bankers who are worried but also their customers in the Swiss corporate banking business, where Credit Suisse also enjoys a leading position among SMEs and multinationals, with a commensurate volume of loans outstanding.
According to observers, it's not economically viable for UBS to burden its balance sheet with the corporate loans of Credit Suisse which the combined bank will try to unwind gradually and cautiously or not renew expiring loan agreements.
Gerber Leaves
While that won't happen overnight - contracts usually run for three to seven years - it's said that nervousness is growing among corporate clients. Andreas Gerber, the head of this business, left Credit Suisse with immediate effect which is unlikely to smooth the waters.
Companies looking for new lenders are the ideal gateway for competitors who will want to talk financing and push investment banking services. Trade finance and cash management are the first steps, followed by advising on bond issues (DCM) and equity capital transactions (ECM), to landing the biggest fish of all: Advising on cross-border mergers and acquisitions.
Scoring Points
Hiring Credit Suisse's DCM specialists is a clear indication of how competing firms calculate, and openly declare their ambitions for the Swiss market. Deutsche Bank, Bank of America, and JPMorgan all claim to be the leading foreign investment bank in Switzerland.
According to the turnover ranking of the analysis company Dealogic, UBS was ahead in the first half of the year, followed by Bank of America and Goldman Sachs.
JPMorgan hasn't limited its focus to business with Nestlé, Novartis & Co. Country head Reinout Boettcher recently told media representatives, it wants to win more Swiss SME customers. With Credit Suisse, a self-proclaimed bank of entrepreneurs, facing an uncertain future, it's probably a good thing for such ambitions.
Adverse Environment
Investment banking interest is likely to increase in Switzerland. Zurcher Kantonalbank (ZKB) has become the leader in domestic bond issues, and other state-owned banks are increasingly interested in this business.
Whether UBS, ZKB, Bank of America or BNP Paribas, all banks have struggled with highly adverse market conditions in recent months. Volumes in Swiss investment banking declined 7 percent year-on-year in the first half of the year, figures from Dealogic show. M&A volumes recovered 15 percent and capital markets transactions doubled. Meanwhile, DCM business saw sharp setbacks.
Even without Credit Suisse's business, UBS investment bankers have their hands full making sure their skins don't swim away.
