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Credit Suisse Replaces Its CEO And Initiates A Strategy Review In The Wake Of A Large Second-Quarter Loss

Credit Suisse Replaces Its CEO And Initiates A Strategy Review In The Wake Of A Large Second-Quarter Loss
In its most recent effort to recover from a string of scandals and losses, Credit Suisse Group AG chose Ulrich Koerner as its new chief executive on Wednesday and announced cost cutbacks as part of a strategic assessment.
The announcement is the result of months of pressure on the company's current CEO, Thomas Gottstein, during a turbulent two-year tenure marked by crushed shares and irate investors, some of whom had called for Gottstein to be dismissed. View More
After costly scandals led a near entire overhaul of management and a restructure seeking to reduce risk-taking, particularly in its investment bank, while bolstering wealth management, the bank has dubbed 2022 as a "transition" year.
Credit Suisse, which reported an April-June loss of 1.59 billion Swiss francs ($1.65 billion), much exceeding the 206 million francs average, has sought to quell speculation that it could be purchased or broken up amid sector consolidation. 
When asked if Credit Suisse would enhance its capital after another quarterly loss, Chief Financial Officer David Mathers indicated on Wednesday that the Swiss bank is sufficiently capitalised.
"I have been CFO for 12 years and I had much, much, much lower capital ratios than this in the course of my time so this does represent still one of the highest capital ratios," he said, noting the bank aimed to keep its CET1 capital ratio at 13% to 14% in the second half in an uncertain environment.
Its CET1 equity ratio was 13.5 per cent of risk-weighted assets, above its near-term aim of 13.5 per cent and coming close to the 13.6 per cent projected by the market. This was lower than its 2024 target of more than 14 per cent and its first-quarter CET1 ratio of 13.8 per cent.
"Our results for the second quarter of 2022 are disappointing, especially in the Investment Bank, and were also impacted by higher litigation provisions and other adjusting items," Gottstein said.
Gottstein's successor, Koerner, who oversees Credit Suisse's asset management division, rejoined the firm following a term at UBS Group AG, where he most recently served as adviser to the CEO from 2019 to 2020. From 2014 to 2019, he was the CEO of UBS Asset Management. Koerner was previously a senior executive at Credit Suisse Financial Services, where he oversaw the Swiss operation.
Credit Suisse officials stated in June that the firm may "temper" some of its core growth ambitions in wealth management as it focuses on risk management and technology enhancements.
In Switzerland, Koerner, a former McKinsey consultant, is regarded as a restructuring expert.
The bank now intends to lower its cost base to less than 15.5 billion francs in the longer term, down from an annualised 16.8 billion in the first half of this year. More information on this was expected with the third-quarter results.
It had previously stated that it wanted to accelerate cost-cutting initiatives adopted as part of its reorganisation in November, with an annual structural cost savings target of 1.0 billion to 1.5 billion Swiss francs by 2024.
It has stated that a technology revamp might save approximately 800 million francs in the medium term, including 200 million francs in each of the years 2022 and 2023.
Mathers stated that the cost-cutting exercise would apply to the entire group, not just the IT division. He provided no information on probable job losses.
Credit Suisse designated David Miller and Michael Ebert as co-heads of the investment bank business as part of the investment bank makeover, while the existing chief, Christian Meissner, will focus on the strategic review.
Credit Suisse "will require time over the next years to resolve its challenges and regain the trust of all stakeholders," Vontobel analyst Andreas Venditti wrote in a client note, adding that the investment bank review is the proper emphasis for Koerner.

Christopher J. Mitchell

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