Change in the air for Credit Suisse as Tidjane Thiam takes helm

On July 1, Thiam will officially replace Brady Dougan as CEO of Credit Suisse. Keystone

Credit Suisse’s new chief executive has already surprised colleagues by showing up at the bank’s Zurich headquarters a week early. Now, both they and investors are waiting to see if Tidjane Thiam surprises again with his masterplan to revitalise Switzerland’s largest bank.

The enigmatic chief executive officer has already given colleagues a few hints of his general approach. He has made it known he wants to move fast to take decisions about Credit Suisse’s future, although getting everything pinned down before the bank’s annual strategy gathering in August could be a stretch.

He has been at pains to insist to colleagues that he does not love Asia – the scene of much of his success as chief executive of insurer Prudential; rather, he loves growth. He has also made it clear that he is against centralisation and wants divisional executives to take responsibility for their own patches.

And if Credit Suisse were ever to sponsor a Premiership soccer team, colleagues are quite sure it would be Arsenal, a team Mr Thiam adopted when he moved to the UK in 2002, thanks to its close ties to the Asec d’Abidjan team he has followed from boyhood.

The 52-year-old, who was appointed in March but is not due to start until July 1, has so far been more reticent on the bigger questions facing Credit Suisse, such as whether it should raise capital, make a big acquisition or radically reshape its investment bank.

His new colleagues and shareholders have had ample time to consider those issues. From more than a dozen interviews with executives and shareholders, a picture emerges of broad agreement in some areas, although opinions are divided on capital and the future of the investment bank.

Change in the air

All agree change is in the air as Mr Thiam tries to put some steam behind Credit Suisse’s stock price, which has risen less than 20% since January 2012 while shares in rival UBS have increased almost 80%.

The easy wins cited by Credit Suisse insiders include doing more to unite the bank’s main geographies and product lines after a “One Bank” strategy launched in 2006 failed to bridge many of the divides between fiefdoms of Zurich, New York and London.

“It’s quite joined up, but it needs to be even more joined up,” says one executive.

Another executive says: “The tone and structure of doing things in New York and doing things in Zurich is still different [but] we do more business together now.”

Cost cuts are the other area of common ground. “The profitability of Credit Suisse’s private bank lags UBS and Julius Baer,” says Huw van Steenis, banks’ analyst at Morgan Stanley, adding that it has the second-worst ratio of costs to income of any large European bank. “I think Tidjane, with a fresh set of eyes, will be able to take out costs.”

One of the bank’s top ten investors says Credit Suisse has two choices: cut costs or raise capital aggressively. “There is some opposition within the bank to capital raising, which means cost cuts – and that surely has to be on investment banking,” he adds.

Mr Thiam’s predecessor Brady Dougan was sharply criticised for not following in the footsteps of UBS with more dramatic cuts to an investment bank that will have more than 60% of Credit Suisse’s leveraged capital even after planned cuts.

“Credit Suisse has got the majority of its capital allocated to its lowest returning business. This must be a red flag to a new CEO,” says Mr van Steenis.

Inside story

Many within Credit Suisse disagree. They say even the leveraged finance business, which has become punishingly expensive to carry out in the new regulatory regime, is worth preserving.

Some point out that areas of the investment bank, such as M&A and the advisory business, are relatively capital-light, while others see potential for growth in areas such as prime broking, where Credit Suisse forges relationships with its biggest hedge fund clients. Insiders also say deep cuts have already been made.

Investors believe the die is cast. “It is inconceivable that Credit Suisse would have hired an Asian insurance guy as their CEO, if they were not going to shrink the investment bank and divert the money into private wealth,“ says Matthew Beesley, head of global equities at Henderson Global Investors.

Executives say Credit Suisse’s private wealth business has been forced to play “quite defensively” in recent years as it dealt with legacy issues such as tax evasion. “We’re now ready to play offensively,” says one executive.

Without extra resources, the private bank thinks it can grow by working more closely with the investment bank. Extra resources could allow an acceleration of growth in markets such as Australia, Asia and some parts of Africa. An acquisition could turbocharge growth, although people familiar with the situation say there are no obvious targets.

Buying anything would require fresh capital and the prospect of Mr Thiam going cap in hand to investors has been a constant talking point between the bank and its investors since his appointment. “There are a mixture of reactions,” says an executive. “It’s very important to combine it with a strategic signal… to drive growth and returns.“

Some think Mr Thiam will wait until the autumn, when the Swiss authorities publish new capital rules for “too big to fail“ banks and when Credit Suisse hopes to know how much it will have to pay for litigation around US mortgages.

As long as Mr Thiam’s surprise is a good one, people seem happy to wait.

Copyright The Financial Times Limited 2015