Credit Suisse promises to show just ‘one face’ to clients
At the end of last year, Credit Suisse Group announced plans to undertake a root and branch reorganisation aimed at fully integrating Credit Suisse First Boston (CSFB) within the group. In what Oswald Grübel, chief executive of Credit Suisse Group, called a “one bank” initiative, the idea is to unify the structure with various operating divisions. This will allow the bank to present one face to its clients with a full suite of services drawn from the different divisions. Mr Grübel has also hinted that the First Boston name will finally be dropped.
There are no real surprises in the operating structure. The three units that will make up the new unified Credit Suisse will be: private client services, corporate and investment banking and asset management. While details have not been given on the precise make up of these three divisions – the work to complete this new structure will take about two years – the bank has named two of the division heads.
Walter Berchtold continues as head of private banking and Swiss retail banking, divisions that are likely to form the core of private client services. In addition, corporate and investment banking will be combined under Brady Dougan, current head of CSFB.
Indications suggest that private client services will be a core focus of the new strategy. In anticipation, Credit Suisse Private Banking (CSPB) has been given a variety of global targets to build the business. In Europe, CSPB must break even by 2007 and in Switzerland it must grow market share. CSPB will also focus on expansion, in Asia, the Middle East, central and eastern Europe and Latin America.
While the head of the asset management division has not been named, it appears the new strategy will place emphasis on this division, not least as an important support structure for the development of private client services globally. In particular, Credit Suisse is looking to strengthen its fund offering. Credit Suisse Asset Management will expand its global product offering and streamline the business in Asia and the US, ahead of the new division’s launch.
The shake-up was announced at Credit Suisse’s Investor Day in December 2004 when the group also revealed performance data for the private banking group. CSPB reported a gross margin of 136 basis points for the first nine months of 2004 and net new assets of SFr22.5bn (E15bn) for that period or 5.9 per cent on an annualised basis.
ASIAN EXPANSION
CSPB has recruited 200 relationship managers since October 2003. This expansion had been most noticeable in Asia where there was a 30 per cent increase in headcount to 177 relationship managers. CSPB has also opened new offices in Guangzhou, China, and Bangkok as well as expanding in Singapore. CSPB now manages CHF46bn in assets in Asia and has seen 20 per cent net new asset growth, on an annualised basis, in the region.
Success in Asia was further demonstrated when contrasted with the onshore Europe business. Here, CSPB reported assets under management of just SFr33bn with a total of 625 relationship managers. This suggests that the average assets under management per relationship manager in the onshore European business are SFr53m, compared with SFr260m among CSPB’s relationship managers in Asia. This variance is the legacy of the bank’s 2000 strategy which focused on Europe’s “mass affluent” segment with the launch of the operating unit Credit Suisse Financial Services targeting investors with E50,000-E1m to invest.
This latest initiative appears to reflect Mr Grübel’s long-term plan to create an integrated banking platform that combines the strength of the investment bank with the international private banking franchise. When John Mack resigned as chief executive of CSFB last summer, the opportunity for this integration emerged once more.
Moreover, it appears the private banking business in Europe is on track for the planned 2007 breakeven – net losses in Europe are down 63 per cent.
Indeed, this proposed new structure looks promising in terms of improving private client services and is in line with most international players, including, of course, UBS. The structure looks better able to serve its clients and at the same time reap the rewards of cross-selling.
However, the question remains as to whether the top-down cultural change that the bank needs to adopt is achievable – especially considering the difficulties it has experienced trying to gel the divisions in the past.
Sebastian Dovey is managing partner at wealth management strategy think-tank Scorpio Partnership
