Credit Suisse to cut 9,000 jobs and dismantle an investment bank

Credit Suisse plans to cut 9,000 jobs over the next three years as part of a major overhaul announced Thursday.

About 2,700 of those cuts will come in the fourth quarter, the bank said.

Credit Suisse also outlined its plan to dismantle its investment bank with the aim of reducing risk-weighted assets by 40% over the next three years and focusing on serving institutional and management clients. of Fortune.

As part of the plan, it is consolidating its capital markets and advisory units under a new CS First Boston banner. This company will be led by Michael Klein, a member of the board of directors of Credit Suisse who is leaving this position to take the helm.

The bank has also reached an agreement to sell the majority of the assets of its securitized product group to a consortium made up of Apollo Global Management and Pacific Investment Management Co.

Credit Suisse is also setting up a capital release products unit – a kind of “bad bank” to hold high-risk assets that it aims to liquidate.

The bank confirms Christian Meisner, its chief investment banker, would step down — a move rumored in recent weeks. David Miller and Michael Ebert have been leading the division’s day-to-day operations since July. Thursday’s announcement cements Miller’s place as global head of investment banking. Ebert, meanwhile, will co-lead the bank’s capital markets business with Ken Pang. Louise Kitchen will lead the capital release products unit, the bank said.

Amid the host of changes, Credit Suisse said it plans to raise $4 billion through a rights issue and sale of shares to investors including the Saudi National Bank, which will pay $1.5 billion to take a 9.9% stake in the bank – making it Credit Suisse’s second largest investor.

The $4 billion capital increase mirrors the amount the bank posted in a quarterly loss on Thursday. Credit Suisse has estimated the cost of its restructuring at around $2.9 billion over the next two years.

Credit Suisse called Thursday’s moves a plan to make the bank “simpler, more stable and with a more focused business model built around customer needs.”

“The new Credit Suisse will definitely be profitable from 2024”, CEO Ulrich Körner told Bloomberg. “We don’t want to overpromise and underdeliver, we want to do it the other way around.”

Körner said the bank has already lined up an outside investor — but hasn’t identified it — willing to commit $500 million to the First Boston venture.

Credit Suisse on Thursday announced nearly $13 billion in outflows in the first three quarters of 2022 as wealth management and domestic Swiss clients withdrew money from their accounts and moved on to rivals. That compares to net inflows of about $30 billion during the same period a year earlier.

The withdrawals continued through the first two weeks of October amid negative press and social media coverage, chief financial officer Dixit Joshi said.

“While these outflows have stabilized since this period, they have not yet reversed,” the bank said in its statement.

Credit Suisse will pay a “nominal” dividend over the next two years, before returning to “meaningful” payments from 2025, executives said.

The bank is targeting a 6% return on tangible equity in 2025.