Old Money: Swiss banking to rescue for 'accident prone' CS

Kaleidoscopic corporate restructurings have long been a feature at Credit Suisse. There appear to have been three drivers – geographical balance, shuffling the deck in its investment banking activities and a noted propensity for being accident prone.

  • By Richard Roberts
  • 08 Mar 2017
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by Professor Richard Roberts, King's College London

The latest turn, announced by Tidjane Thiam, the chief executive, in October 2015 has a novel feature — the creation of a ring-fenced Swiss Universal Bank — CHUB — whose IPO, slated for later this year, would have raised up to $6bn of additional capital through the sale of 20%-30% (though it may no longer go ahead).

The Swiss entity is the "jewel in the crown" of the group, according to rival bankers, but that's no accident.

From the 1960s Credit Suisse specified a "50:50 rule", requiring the maintenance of a roughly equal balance between domestic and international activities, designed to maintain its standing as a Swiss bank despite expansion overseas. 

The trouble was, there were a lot more opportunities for growth in the burgeoning Euromarkets than in the bounded and crowded Swiss domestic market. In the post-war decades, Credit Suisse lagged behind UBS and SBC in domestic branches and balance sheet. 

This was partly because in Switzerland it was first and foremost a commercial bank, whereas its rivals vigorously expanded their retail operations, gathering deposits that they deployed in other activities. A major acquisition in 1976 reversed the domestic stagnation, while the bank’s new-found enthusiasm for retail was expressed in the slogan: "Credit Suisse — there for everyone".

Credit Suisse was the foremost beneficiary of a consolidation wave among Swiss banks in the 1990s, triggered by other banks’ losses on — as ever — real estate lending.

Highlights were its acquisitions of Bank Leu, the oldest Swiss bank and sixth largest, in 1990 and Swiss Volksbank, the fourth biggest, in 1992. 

By the mid-1990s Credit Suisse was the largest Swiss domestic bank — until the merger of rivals UBS and SBC in 1997. CS also moved into insurance with the creation of CS Life in 1989 and then a merger with Swiss insurance giant Winterthur in 1997. But the "Allfinanz" drive did not work out; Winterthur was sold to Axa in 2006. Nevertheless, from this point, Credit Suisse’s formidable Swiss universal bank was increasingly the star of the show.

Into Eurobonds


In wholesale, Credit Suisse developed international trade financing from the 1920s. It opened its first foreign branch in New York in 1940 at start of the war, partly as a safeguard in case the Germans invaded. 

Euromarket operations developed from 1962 through a partnership with White Weld, an internationally orientated US investment bank; their joint venture Credit Suisse White Weld was a formidable force in the Euromarkets in the 1960s and 1970s and home to some of the market's biggest stars. These years also saw the creation of Credit Suisse’s own international network of offices.

When White Weld was acquired by Merrill Lynch in 1978, Credit Suisse created a new partnership with First Boston, a bulge bracket heavyweight; Credit Suisse First Boston was also a leading player in the international capital markets. Credit Suisse subsequently acquired First Boston and the brand disappeared in a 2006 restructuring. International investment banking operations were extended through acquisitions including UK merchant bank BZW in 1997, and Wall Street investment bank and high yield specialist Donaldson, Lufkin & Jenrette in 2000, the latter at the top of the market and soon turned sour prompting yet another restructuring.

Accident prone


Credit Suisse’s string of mishaps began with the Chiasso scandal in 1977, then the biggest ever to strike a supposedly staid Swiss bank. Managers at the Chiasso branch near the Italian border offered illicit Italian capital flight depositors 8% interest with an unauthorised Credit Suisse guarantee. Around $1bn of funds were placed with a Liechtenstein finance company that proved to be essentially a Ponzi scheme. 

Another mishap of a very different sort stemmed from its leading role as a foreign bank in post-Communist Russia, establishing the first Swiss bank office in Moscow in 1991. When Russia devalued and defaulted on state debt in 1998 Credit Suisse was a major casualty with a Sfr1.9bn write-down and half the 350 staff let go. 

The following year its licence to operate in Japan was suspended by the authorities for providing window dressing services for clients through derivatives that helped them hide losses.

The current restructuring is, arguably, a response to another such acute mishap, in the shape of the bank's multi-billion settlement for RMBS mis-selling in the US. But there's a regulatory push too. It's raising capital to meet higher regulatory requirements and strengthening the ring-fenced Swiss entity while also building its private banking and wealth management activities and reining back on investment banking. 

All fair enough — until the next accident, and the next restructuring.

  • By Richard Roberts
  • 08 Mar 2017

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 393,149.84 1484 9.02%
2 JPMorgan 359,273.23 1632 8.24%
3 Bank of America Merrill Lynch 345,204.73 1224 7.92%
4 Goldman Sachs 257,794.01 867 5.91%
5 Barclays 253,576.08 996 5.82%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 HSBC 36,809.20 177 6.30%
2 Deutsche Bank 36,549.85 129 6.26%
3 BNP Paribas 30,786.06 186 5.27%
4 Bank of America Merrill Lynch 30,712.91 97 5.26%
5 Barclays 30,558.69 87 5.23%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 21,398.51 94 8.79%
2 Morgan Stanley 17,574.08 91 7.22%
3 Citi 16,974.50 104 6.97%
4 UBS 16,643.68 66 6.84%
5 Goldman Sachs 16,179.39 87 6.65%