Credit Suisse is Going Through Changes

After years of nightmarish results and unforced errors, Credit Suisse’s balance sheet looks more like swiss cheese but it’s finally getting serious about plugging the holes…or even selling them.

The embattled Swiss financial services company reported a hefty quarterly loss on Thursday and announced that it is beating a hasty retreat from investment banking to focus on wealth management.

A Swiss Miss

To get moving on what it referred to as a “radical restructure,” Credit Suisse is spinning off its investment banking division, which has been rebranded to CS First Boston, selling its structured products business to Apollo Global Management, and raising $4 billion from the Saudi National Bank. Those moves will allow Credit Suisse to focus on its legacy wealth management business and cauterize its wounds from i-banking blunders like its role in the Greensill Capital and Archegos Capital Management scandals.

The turnaround plan was unveiled alongside Credit Suisse’s third-quarter results. It posted a net loss of just over $4.09 billion, well over analyst expectations of $567 million, cratering its stock price in Thursday trading. CEO Ulrich Koerner, who took the reins in July — making him Credit Suisse’s third chief in five years — told CNBC that the “transformation into a new Credit Suisse” is about to begin:

• The old Credit Suisse has been hemorrhaging capital for years, with losses from Greensill and Archegos totaling $11 billion of losses, and it disclosed Thursday that another $13 billion was pulled from its coffers in the first nine months of 2022. In the last five years, Credit Suisse stock has fallen more than 76%.
• Metamorphoses are not cheap or easy, however, and Credit Suisse will have to spend $2.9 billion on the changes this year alone, and it will reduce its headcount by 9,000 by the end of 2025.

Memes Gonna Meme: After drawing the ire of meme stock traders for its downgrade of GameStop, which prompted retail traders to attack the bank’s stock in retaliation, Credit Suisse analysts issued a downgrade of AMC Entertainment stock on Thursday and stock in the movie theater turned meme idol dropped just over 1% on the day. Credit Suisse shares fell more than 20% on Thursday, creating a wave of schadenfodder on Reddit and Twitter.