Credit Suisse has buried a planned listing of its Swiss-based business that the unit had worked for months at fever pitch to prepare for. What now?
Zurich-based Credit Suisse’s preparations for the largest initial public offering of the year have dominated headlines for months. The Swiss bank’s capital is severely depleted, and an October 2015 plan to raise up to 4 billion Swiss francs by listing a minority of its home business was a quick fix – on paper.
In reality, the plans for what would have been Europe’s largest IPO this year roiled the unit, which is in the throes of legally carving itself out for regulatory reasons anyway. The stock listing plans simply put a hideous mid-year deadline to those preparations.
Drawing Board
What looked impeccably mapped out on a consultant’s drawing board 19 months ago has affected 4,000 employees. That all changed in December, when Credit Suisse learned that it would get off with a far lighter penalty in a mortgage mis-selling investigation than it had feared.
Suddenly, Credit Suisse’s capital hole didn’t look quite as gaping. Would Credit Suisse still need to list part of its crown jewel, an orderly and reliable provider of lucrative profits?
Scattering Doubts
Chief Executive Tidjane Thiam begun scattering doubts in February over whether the IPO would go forward, but roughly 20 staff at Credit Suisse in Switzerland nevertheless carried on with preparations. They had gotten as far as outlining a tentative IPO prospectus when the plans were buried.
What happens now that overall bank Thiam has ditched the plans, opting instead for a quick 4 billion Swiss franc cash call from shareholders? finews.com looks at the unit’s big challenges:
1. Settle Nerves
Swiss head Thomas Gottstein (pictured below) has already moved to settle nerves that the unit could be chopped and changed again following Thiam’s reversal. Domestic business tends to get little attention at either UBS or Credit Suisse, and staff at the business had visibly enjoyed the recognition of their value that the IPO plans had brought.
Roughly two dozen staff who had been working full-time on the planned listing have already been quietly redeployed back into regular business roles at the bank. Gottstein still has hard regulatory deadlines to fulfil next year and in 2019, so his challenge is to get staff who had been in IPO fever to warm to regulatory drudgery (fun!).
By necessity, the unit has been very Paradeplatz-centered in recent months; Gottstein will have to pay more attention to the world outside of Zurich now that the IPO has been blown off. At least, Thiam and Gottstein promised no more restructurings following the carve-out.
2. Group Role
Overall CEO Thiam and Gottstein appeared together on Thursday at a staff town hall, highlighting how keen Credit Suisse is to maintain the Swiss unit’s role in the larger bank. Why is this somewhat obvious point important? Staff have suffered an uneasy limbo since Thiam cast doubt on the IPO plans since February, which has made for uncomfortable questions from clients, as finews.com has previously written.
The unit’s strategy, targets and set-up won’t change, Thiam and Gottstein told staff. «We will keep investing in our home market and rolling out our long-term strategy,» a spokesman told finews.com.
The bank under Thiam has backtracked on targets and now on a major pillar of strategy, and the mothballed IPO plans could undermine the Swiss unit’s standing. Whether the unit – the most profitable in the larger group – can assert itself more confidently against heavyweight investment bankers and upstart private bank executives without the benefit of the IPO remains to be seen.
3. Motivation and Staff Retention
Credit Suisse hired hired several bankers for the Swiss unit including Cembra’s Antoine Boublil (pictured below) as finance chief and Dagmar Kamber-Borens, a 17-year veteran of UBS, as operating chief. The prospect of working on the largest European IPO of the year and a novel move in banking overall was a powerful pull for many of these new hires, just as it was a motivator for the rank and file (see Point 1).
The writing had been on the wall for months, but last week brought certainty: there would be no IPO, and in some cases months of preparatory work had been for naught. Gottstein, a career investment banker who may well himself be peeved that Thiam stopped the listing, needs to halt prevent discontent from spreading.
A spokesman for Credit Suisse said favorable quarterly results last week had lifted the mood, showing that the bank’s strategy at home is working.
4. Gottstein's Future
The 14-year investment banking veteran switched to the business side shortly before Thiam’s arrival, and was the logical choice for head of Switzerland in a top management that is thin on Swiss natives.
The listing would have been a crowning career achievement for Gottstein and undoubteldy would have burnished the name of Gottstein’s mentor, Marco Illy (pictured below) as well. Instead, it is back to the daily banking grind, which may not prove as lucrative.
Will Gottstein put on a brave face, or waver in his commitment? A spokesman said the banker «backs the group’s decision to 100 percent and is focused with his team and all employees on successfully implementing our strategy.» Chatter inside Credit Suisse speculates that Gottstein may not be Thiam’s long-term choice given the now blown-off IPO.
After nearly two years in the job, Gottstein has probably had long enough to cement his role – not least because of his excellent connections to Swiss entrepreneurs and executives the bank is targeting.
