As the bank booked its first full year loss in seven years, it must take a drastic measure to retreat further in its investment banking division. This mark the end of glorious era from the former powerhouse in European banks.
Credit Suisse CEO Tidjane Thiam, who was appointed in July, had tried to restructure the equities and fixed income business in the lenders. He insisted that the equities and fixed income activities in the investment banking has damaged the bank's financial group. The former insurer in Prudential then took action by cutting thousands of jobs from the trading unit and reducing unwanted assets which reached tens of billions of dollars.
As the bank has posted a nearly $1 billion in write-downs since the start of the fourth quarter, Credit Suisse planned to make a new retreat from investment banking. This measure was made as investors have cut the share price of the bank to one-third of its value in the past three months.
Market Watch reported that troubles in Credit Suisse are symptomatic of the broader malaise in the Europe's biggest investment banks. Recently, major European banks have been struggling to deal with depressed trading, tougher capital requirements and market volatility. In Credit Suisse, the problem was adding up with traders limits which had been raised.
CEO Thiam in a conference on Wednesday, March 23, said, "This was all before my arrival". He further added, "A limit that keeps moving is not a limit. That's really where things went wrong."
Thiam also recognize the morale problems in trading and global-market unit which hires around 11,000 employees, as he will cut thousands of jobs in that unit. In total, the bank has planned to cut 6,000 jobs, which 2,800 have already been implemented.
As a solidarity for traders, the CEO has asked to take cut in his bonus by 40% as the trading bonus pool was cut by 36%. Despite his "excellent performance," Credit Suisse in annual report approved his request. Bloomberg reported that Thiam said, "I felt that out of solidarity, I should take a cut bigger than the global markets."
In aiming for the next growth, the second largest bank in Swiss planned to increase its presence in China. Reuters reported that in a media briefing on the sidelines of the annual Credit Suisse Asian Investment Conference in Hong Kong, Thiam said, "We have been underweight (in) China and will continue to invest."
Credit Suisse will plan to increase its wealth management division as a key platform to its future plan. As the Swiss bank must take a drastic measure, it has to make another retreat in investment banking which previously had been its strong business.
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