Credit Suisse Bets The House On Wealth Management

When all else fails in banking, throw on the white gloves and cater to the rich.

After a series of missteps, Credit Suisse announced it will prioritize wealth management going forward, targeting a 25% profit boost to the unit by 2023.

Fortune Focus

Credit Suisse has hit stormy seas this year. Former CEO Tidjane Thiam was ousted in February after a bizarre spying scandal and the bank also took flak for marketing securities linked to shares in German fin-tech company Wirecard, which proceeded to disintegrate in June.

On top of all that, Suisse said in November it is facing a $450 million impairment on its equity stake in York Capital Management, which is winding down its European hedge fund business.

All the negative press has put new chief executive Thomas Gottstein in a tough spot. At his first strategy presentation Tuesday, Gottstein enlightened investors on his vision for the Swiss bank:

  • The CEO said Credit Suisse will allocate 2/3 of its capital to wealth management, aiming to raise the unit’s annual pretax profit by 1 to 1.5 billion Swiss francs by 2023.
  • Suisse’s wealth management business serves everyone with enough skin in the game, from family businesses to Silicon Valley entrepreneurs. Gottstein called it “one of the most attractive segments in financial services,” noting the Asia Pacific region as a particularly favorable market.

Credit Suisse also expects improved 4th quarter investment banking revenues versus a year ago and will allocate the remaining third of its capital to i-banking. Gottstein added, “we also expect to further expand the connectivity between our investment bank and the wealth management-related divisions.”

UBSuisse?

The potential for an oft-speculated merger between Credit Suisse and UBS was renewed earlier in 2020, when UBS said it looked into the possibility as a cost-cutting strategy.

Departing Credit Suisse Chairman Urs Rohner told a Swiss newspaper earlier this month that a union with the bank’s number one rival was not “unreasonable” and would improve the influence of both institutions.

Don’t Bank On It: UBS Chairman Axel Weber threw cold water on the idea of a near-term combination last week, saying “I don’t expect these things to happen at the current juncture. I think these will be things discussed for years to come before we see any concrete movement.”