The Swiss bank is tapping a trading veteran to take responsibility to its business of lending to wealthy clients, finews.com has learned.
The Swiss bank’s wealth arm set up an international financing group, or IFG, during the third quarter, led by Yves-Alain Sommerhalder, a spokeswoman for Credit Suisse told finews.com on Thursday. The trading veteran took over a unit built from simplifying flow, structured, and real assets-based lending teams into one.
«This will provide more direct access to lending expertise, fast decision-making and time-to-market,» Credit Suisse said. Under Sommerhalder, IFG will optimize use of the Swiss wealth manager's capital, together with finance chief David Mathers, the spokeswoman said. Sommerhalder, who is Swiss, will report to Philipp Wehle and Brian Chin, who run Credit Suisse's private bank and markets arm, respectively.
Job Well Done
The move is a bid by wealth management head Wehle (pictured below) to drum up business by lending to billionaires. It is also an acknowledgement of a job well done by Sommerhalder in the three years running an international trading and financing joint venture between Switzerland, wealth management, and capital markets. Sommerhalder will continue to hold that role in addition to spearheading the lending effort.
At the same time, private bank head Wehle battened down the hatches for «potentially significant credit losses, which are likely to impact our results for future quarters,» according to Credit Suisse’s third-quarter report. Despite the outlook, Wehle actually dialed back provisions against those losses (just 12 million Swiss francs, or $13 million, in the quarter, down from 34 million francs last quarter).
Generous Balance Sheet
Credit Suisse has sought to shield itself against what it expects for big loan defaults at the unit with 85 million francs in provisions so far this year, under a new accounting standard rolled out in January. Wehle’s generosity with balance-sheet lending will deepen the contrast to crosstown rival UBS, which has long hewed to a far more conservative tone.
Credit Suisse is also looking to Christian Meissner, who started in his new job as a vice-chairman of investment banking, to find lucrative opportunities for super-wealthy clients. Martin Hofacker, who previously led the real asset lending unit now subsumed into the IFG push, was named deputy head of IFG.
Opaque Trading Unit
Sommerhalder, who has spent the entirety of his 18-year career at Credit Suisse, got his big break when previous CEO Tidjane Thiam tapped him for the trading collaboration in 2017, and expanded his remit last year. Credit Suisse doesn't disclose any financial specifics of the unit, GTS, which enjoys wide authority over at times unconventional forms of financing, according to analysts.
The changes come against the backdrop of a gloomy showing from the wealth unit: pre-tax profit shrank by more than one-third, hit by amid nearly 30 million francs in restructuring spending and big drops in nearly every type of revenue, both on the quarter and on the previous year.
Aggressing Lending
Sixteen months into the top Credit Suisse wealth job, Wehle is grappling with an intensely bloated cost-income ratio – 80.1 percent, from 63.1 percent year-ago. The business’ gross margin is retreating (96 basis points, down from 107 in the second quarter) off the revenue shortfall.
Credit Suisse’s aggressive peddling of loans is meant to help: the wealth unit’s penetration of loans as a portion of overall assets was 15 percent: it totaled one-quarter when including wealthy clients in Asia and in Switzerland. The majority of loans in the private bank are backed by listed securities, by ship financing, or home-equity loans, Credit Suisse said.
