Credit Suisse’s Asian business in for a shakeup, and it could have significant implications for senior management and internal power structures in the region.
The bank reportedly plans to shift its Asian investment banking division into its global advisory business, a move that would signal the end of the regional strategy pioneered by former CEO Tidjane Thiam.
In 2015, Thiam carved out Asia-Pacific as a dedicated business division with its own investment banking and advisory arm. The intention was to supercharge growth by offering more trading and capital markets products to its Asian billionaire client base.
There are a number of reasons why Credit Suisse is now looking to put its global investment banking business back together. Firstly, it’s the next logical next step after CEO Thomas Gottstein created a global investment bank in July 2020, bringing together the former Investment Banking and Capital Markets (IBCM) and Global Markets (GM) divisions as well as Asia Pacific (APAC) markets. The markets division was the investment banking powerhouse in Asia, so bringing IBCM into the fold completes this process.
The move will centralize and simplify the bank’s operations. Chairman Antonio Horta-Osorio is currently undertaking root-and-branch review of the group’s operations following the losses associated with the collapse of Greensill and Archegos Capital. Horta-Osorio has already revamped and strengthened the risk management function, and has hired executives including David Wildermuth from Goldman Sachs Group in July to become chief risk officer.
Change in Asia is long overdue. Thiam’s convoluted structure was both unique among big western banks and difficult to understand. Putting the investment banking and advisory operation back on a global footing will make it easier to manage and also should boost collaboration between regions.
The Asian power-base at Credit Suisse
Dismantling Thiam's structure may not be popular with everyone at Credit Suisse, however. The man with the most to lose would seem to be Helman Sitohang, the Indonesian group CEO for Asia Pacific who has a big power base and considerable clout.
Sitohang was promoted to run Credit Suisse's Asian business in 2015. He has been a strong advocate of Credit Suisse’s ‘One bank’ strategy, using his links with the region’s billionaires to scoop lucrative underwriting and advisory mandates. Sitohang’s rainmaking credentials are widely acknowledged – he is credited with is credited with more than $200 billion in deals and capital-raising in 22 years at the Swiss bank, according to Swiss website finews.
But he’s also been close to recent controversial clients of the bank, and was one of Lex Greensill’s biggest advocates, seeing him as an ideal client – an entrepreneur with touchpoints throughout the bank.
In 2020, the bank generated revenues of Sfr3.1bn in APAC a 4% increase on 2019, but some way short of its best ever performance of Sfr3.8bn, which was delivered in 2015, the inaugural year of the new structure. Headcount has risen to 6,890 from 6,590 over the same period, according to the bank’s annual report.
Credit Suisse doesn't provide a break-down of revenues in APAC purely derived from IBCM, but has a reporting line called ‘transaction-based revenues’, which covers trading, underwriting and M&A advisory. That generated Sfr1.6bn of revenues last year, just over half of the total revenues generated in the region.
The bank was ranked fourth by M&A revenues in APAC in the first half of the year, compared with first a year ago. In investment banking, it was ranked eighth by fees from underwriting and advisory for international business in China, down from second a year ago, according to data from Dealogic
It's conceivable that very little will change under the new structure. Credit Suisse operates the same matrix structure in Asia Pac as it does other regions, with dedicated industry and country heads, overseen by regional management –Zeth Hung and Ed Low are co-heads of IBCM for the Asia Pacific region and are expected to continue in their roles. Credit Suisse has also just conducted a revamp of its investment banking line-up in the region, making a raft of promotions in a move seen as the bank promoting its next generation of bankers. It is also committed to a big expansion in mainland China, where it became a majority shareholder in its joint venture in June 2020 and appointed Janice Hu as CEO in July 2021.
However, there will no doubt be savings to be made from stripping out operational management roles. And depending on whether the plan is approved and what is looks like, CS’s investment bankers in APAC could have less latitude when it comes to backing clients if the depend on the balance sheet of the investment bank, rather than that available in the region.
It remains to be seen what this will mean for pay. As part of a standalone Asia Pacific group, IBCM’s bonus pool is dependent on the performance of the regional entity and will have performance criteria linked to the region. Shifting it into the global investment bank could mean bonuses could be measured by different criteria.
Overall, the biggest winner from the proposed strategic revamp will be Christian Meissner, the CEO of the Investment bank. With Asia added, Meissner will have a bigger and more clearly-defined empire. As for Sitohang, who along with Gottstein is the only surviving member of the executive board appointed by Thiam at the time of the 2015 restructuring, it remains to be seen whether his role will shrink along with his responsibilities.
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