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Strategy day Credit Suisse to make further CHF1bn cost savings

Credit Suisse Chief Executive Tidjane Thiam has had to make some big decisions since starting at the bank

(Keystone)

Volatile market conditions have forced Credit Suisse to announce a further CHF1 billion in cost cuts in the next two years. Investment banking difficulties in Asia Pacific (APAC) have forced the bank to reduce profit targets, also for wealth management in the region.

Switzerland’s second biggest bankexternal link expects to achieve a CHF1.6 billion cost reduction this year, reducing expenses to below CHF19.6 billion. The previously announced future cost base target of below CHF18 billion would be expanded to bring expenses to below CHF17 billion, by the end of 2018.

At a press conference on Wednesday, chief executive Tidjane Thiam refused to comment on how the new cost cutting targets could affect jobs. A year ago, Switzerland’s second biggest bank announced thousands of job losses, including 1,600 in Switzerland.

Before Wednesday’s investor dayexternal link, the media had been full of stories predicting a further 1,300 job cuts in Switzerland. But Thiam told journalists that “it would not be helpful” to talk any further about job cuts. The search for productivity gains has to become a way of life at the bank,” he added.

Further savings are expected in advanced IT systems, particularly via a new platform that will streamline the regulatory compliance process when assessing the risk posed by new clients. This would increase the number of new clients the bank can add to its books and “reduce the size of teams” involved, Thiam said.

In a press statement the bank said, “we are continuing to make investments in people and in technology”.

APAC woes

Thiam said that the APAC equities market had proved “a more challenging environment” than he had thought when he first joined the bank just over a year ago. As a result, Credit Suisse will focus more on the “more predictable and stable” wealth management in the area in future.

Helman Sitohang, CEO of Credit Suisse Asia Pacific, highlighted to investors some of the difficulties being faced in the region for investment bankers. Equity trading volumes are down -47% in the year so far, prompting a revision of the overall APAC pre-tax income forecast from CHF2.1 billion to CHF1.6 billion in 2018.

This downward revision is entirely due to lower than expected investment banking returns, with the wealth management pre-tax income forecast remaining the same at CHF700 million. This represents a blow for Thiam, who talked up the APAC region when he took over at the head of Credit Suisse.

Swiss Bank

Credit Suisse gave further details on Wednesday about their recently launched Swiss unit, created to meet ‘too big to fail’ regulatory requirements. The division came into existence on November 20, servicing all the group’s Swiss-based business.

Credit Suisse plans to partially float the enterprise in the second half of next year, pending regulatory approvals and market conditions. CEO Thomas Gottstein told investors that the Neue Aargauer Bank, Bank-now and Swisscard will be fully integrated into the domestic operation in the first quarter of 2017.

According to the schedule, the entity should receive a full banking license by the end of June next year. Credit Suisse then plans to sell off shares for 20-30% of the company in the latter half of 2017.

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