First up, it meant another quarterly loss. One might be an accident; two starts to look careless, particularly as both were achieved without the aid of major litigation or conduct charges.
Unlike UBS, which managed to do its restructuring against a strong market backdrop (group CFO Tom Naratil talked to GC about it here), Credit Suisse has had to start executing against extremely shaky risk markets, particularly for the kinds of asset – leveraged lending, securitization inventories and CLOs – that the bank was trying to run down. Perhaps the bank didn’t help itself by offering so much detail about its planned turnaround. It’s a big help to journalists, bank analysts, and investors, but probably not so much to its traders trying to unload illiquid positions.
In the investment banking products, results were awful, but not that much worse than the market – DCM was down 16%, ECM down 53%, but advisory was actually up 93%. The Swiss universal bank (CHUB, charmingly) booked Sfr225m of revenue from corporate and institutional banking – more than DCM and ECM combined. Whatever CS is doing in its home market, at least, is clearly working.
Fixed income trading, though, was the real shocker, down 82%, with equity trading down 29%.
And, on top of that, there’s the “surprising” distressed debt positions, and the ongoing recriminations over whose fault it was anyway. Former investment bank head Gael de Boissard is all lawyered up and ready to fight over any suggestions he was to blame, while the new management are adamant it wasn’t them either.
David Rothnie, in Southpaw, argues that the episode doesn’t look good for chief executive Tidjane Thiam, but that longer term, the strategy he is pursuing could still deliver value – through a breakup of the firm.
Fantasy bank M&A can sometimes be an amusing parlour game – JPM to bid for StanChart, anyone? – but it makes more sense than most with Credit Suisse. The Swiss bank has already packaged up its Swiss operations for an IPO, and grouped all the Asian operations together as a universal bank. Assuming it keeps wealth management and private banking, that leaves pure play investment banking, with particular strengths in levfin and advisory, for sale in the US and Europe.
Prospects for the industry might not be great right now, but the entry levels would surely be attractive, and there *are* firms looking to grow (mostly Japanese and Chinese, but there are some deep pockets out there).
Actually, the market kind of liked the Credit Suisse results, illustrating the power of low expectations. The good news was concentrated in Switzerland, wealth management and Asia pacific, with wealth management boosting margin and money under management. The bank is also making good on its plan to carry on investing in these areas, with an ambitious hiring plan ahead in Asian wealth management.
Other results of note were UniCredit’s, which sent GC on an investigation of just how the bank managed to fund its contribution to the Atlante rescue fund (whose first transaction was, erm, getting UniCredit out of its sole underwriting commitment for the €1.5bn Vicenza IPO) so cheaply.
UniCredit puts down €118m of common equity; Vicenza gets €300m. Thus, the Italian banking system gains regulatory capital without costing anyone money. Intesa Sanpaolo, meanwhile, had to put down €225m — raising the question of what exactly the ECM’s Single Supervisor and the Bank of Italy told the Italian banks. Next up, Veneto Banca, with a sole underwrite from Banca IMI, the investment banking arm of Intesa.
The field of people moves, however, looks relatively barren. The main news is that Citi’s head of corporate syndicate, Sarwat Faruqui, is headed to Mitsubishi UFJ as head of EMEA syndicate. The seat has been vacant since Fergus Edwards walked, and Faruqui has worked for Paul Young, international head of capital markets, in his previous role as head of EMEA DCM and syndicate at Citi.
Elsewhere, it increasingly seems to be about internal hires and promotions – equities heads at Citi and HSBC, replacing retirees, for example, or filling Sebastien Domanico’s spot as FIG DCM head at Sociéte Générale (the winner has yet to be announced, but the bank hasn’t been looking outside).