As its market cap slips below $25 billion, the Swiss bank’s options are shrinking. António Horta-Osório's strategic options inevitably lead to mergers or being acquired – his choice is sooner or later.

As the Sturm and Drang of March (Greensill, Archegos) and April (management and board exits, a $1.9 billion cash call, more regulatory scrutiny) settles, Credit Suisse is sitting down to a strategic review under Chairman António Horta-Osório.

The Portuguese banking veteran’s dilemma is identifying the most troubled spots and deciding what to salvage – amidst a minefield of domestic economic and political interests. His entrance buys Credit Suisse reprieve before the deal talk begins in earnest.

«We will take the time required for an in-depth assessment of the bank’s strategic options,» Horta-Osório told investors ten days ago when he took over. «This will be done with a long-term perspective not losing sight of the short-term needs.»

Pastiche Of Risks

His most urgent priority may be to parse whether he can merge Credit Suisse as a whole or to break up the bank into pieces to merge, sell, or share elsewhere. It would leave a core Swiss bank that doesn’t gamble as most of the other units have, at one time or another, done.

Horta-Osório and CEO Thomas Gottstein are managing a pastiche of risks – not all of which Credit Suisse can shoulder. It already ring-fenced money management, where it is most vulnerable due to the $10.1 billion supply chain debacle.

Unaffordable Luxury

Now led by Ulrich Koerner, the unit’s Greensill crisis lays bare that asset management «is a luxury Credit Suisse can no longer afford,» according to a capital markets veteran.

Credit Suisse will want to find a way out or to share it: CSAM isn’t high-margin enough compared to its other businesses nor does it contribute meaningfully to overall profits, and the industry is increasingly favoring sheer heft.

Rivals Kick The Tires

Credit Suisse may not have the time to do so: most bank CEOs in Europe are already kicking its tires and specifically Deutsche Bank «should take another look,» the banker said. It already reportedly has a suitor for its Brazilian arm in broker XP.

And for Barclays, HSBC, and even Lloyds (which of course Horta-Osório ran for the last decade), the Swiss bank represents «a real steal,» «The Telegraph» (behind paywall) urged last week.

«Suisse» Sell-Out?

The British outlet highlighted the wealth management crown – which would also interest growing and financially potent players like Goldman Sachs – as well as a natural British-Swiss fit and Credit Suisse’s share price at 25-year lows. «Even» Lloyds is double the Swiss’ size, the British outlet noted (and left little doubt who would chair a combined Lloyds-Suisse).

Would regulatory Switzerland allow a cross-border takeover of a 165-year-old Swiss bank whose history is so deeply enmeshed with the alpine nation that it carries «Suisse» in its name? Known for his diplomacy, Horta-Osório needs to navigate this uncharted territory against a strict timeline.

«One-Bank» Unwind?

Any deal talk needs to be caveated: Credit Suisse’s businesses are heavily intertwined and not easily separated. To wit, CSAM’s Greensill funds mostly landed with Credit Suisse’s wealthy clients. «One-bank» is more than 15 years old, as finews.com highlighted last month.

Mergers and acquisitions won’t actually happen for another six months – at least: Credit Suisse is still in the midst of damage control, including tricky decisions over how to handle major losses for clients. It would also want to revive its tanking share price before it embarked on any discussions.

Stripping Off Husk

The issue around asset management isn’t a new one for Europe’s banks, some of which have joined up in ventures like Amundi or come close to deals, like Deutsche Bank’s DWS and UBS’ money management units, which came close to fruition before falling apart over headquarter location, a source familiar with the matter told finews.com.

What about after shedding what Credit Suisse doesn’t want or can’t afford (specifically, an investment bank which as J.P. Morgan analyst Kian Abouhossein pointed out last month, doesn’t make cost-of-equity returns over the long term, a few good quarters notwithstanding)?

Once the «one-bank» husk is stripped away, what remains of Credit Suisse Suisse will be too small, insiders fear. The Swiss bank’s end game may be a European merger – sooner or later.