While the world is looking at cost cuts and changes in investment banking, the future of Credit Suisse is being decided somewhere else, namely where CEO Thomas Gottstein attempts to show that his bank is a Champions League contender.
In the long run, the performance of Credit Suisse will be measured by how well it does in wealth management. Private banking and wealth management are the core business of the Zurich-based company and define its place among the global leaders.
The restructuring of the investment bank is not unimportant for the bank, but is still a secondary consideration in this context.
Wealth management is currently heavily impacted by the corona-crisis and many rich customers have lost a lot of money through the volatility on the markets. Any private banker will have a tough job on his hands to get them place more money under the circumstances.
Asset Drop
In Asia and Switzerland, the bank has done relatively well in the first half, according to the figures published on Thursday. They were stable for Asia and only slightly below last year’s numbers for Switzerland. The international wealth management however has seen assets under management decline by a fair bit.
The overall picture remains cloudy though, with asset growth negative due to the pandemic. In Asia and Switzerland, pretax was up, but rival wealth managers tend to have done better in the first half.
Sustainable Success
The surge to safe banking havens seems to have bypassed Credit Suisse, which its new CEO Thomas Gottstein (pictured below) and his crew will know all too well. His team has decided on a number of measures that clearly aim at improving the wealth management. In the context of the latest reorganization, the bids to boost private banking will prove decisive, and make or break its quest to improve the share price.
The organizational changes at the investment bank therefore are a slightly secondary consideration. The planned cost cuts of an annual 400 million Swiss francs ($437 million) may be a must for efficiency purposes. But defensive measures alone won’t help the bank become successful though and the planned growth initiatives as well as the future of wealth management will become central.
Use of Capital
The announcement of Gottstein to use two thirds of the capital on wealth management and on boosting growth is pointing in this direction. A slightly simplified breakdown along the lines of the three divisions shows how:
- Hiring new relationship managers, primarily for Asia, but also in Switzerland
- Expanding financing opportunities for the rich clientele
- More onshore business, mainly in Asia
- More intensive catering to the very rich and their needs, mainly in a bid to double revenue growth in the global wealth management
- Sustained focus on digitization
- Better use of partnership agreements with other companies, mainly in Switzerland to improve the cost-income ratio
- Expansion of sustainability offering to satisfy a global megatrend.
If Gottstein succeeds in making his wealth management more dynamic by implementing these core programs, the chances are that Credit Suisse can finally come good and satisfy its ambitions. It would also be a major boost for the standing of Swiss banking.
