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Culture change Credit Suisse throws CEO succession curve ball

Tidjane Thiam, current head of British insurer Prudential (left), will take over from Brady Dougan, longtime CEO of Credit Suisse

(Keystone)

American investment banker Brady Dougan struggled to secure universal acceptance as Credit Suisse chief executive. His replacement from July, Ivory Coast and French citizen Tidjane Thiam, could also hardly be described as the archetypal Swiss banker.

With a background in management consultancy, insurance and African politics, Thiam might not at first glance seem like an obvious candidate to lead a crown jewel in Switzerland’s wealth management-dominated banking sector.

The switch from Dougan to Thiam represents a “deep cultural change” at the bank, according to a Tages Anzeiger newspaper article that makes much of Thiam’s status as only the second black boss of an international bank.

Life at the helm of a major Swiss bank will be a far cry from the political turmoil of Ivory Coast, where as a boy he saw his father made a political prisoner. Later, when he was a government minister himself, Thiam was held under house arrest following a military coup in his home country in 1999.

But the markets clearly believe in the current head of British insurer Prudential, with Credit Suisse shares rising strongly on the news of his appointment on Tuesday. “Tidjane and I have worked together over the past six years, and I have tremendous respect for him,” Dougan said in a statement.

The former McKinsey consultant, who once turned down an offer to be Ivory Coast Prime Minister, has a reputation for possessing an analytical mind, strategic skills and influential government contacts – particularly in Asia. His success in building Prudential’s business in the fast growing Asian zone was a strong factor his appointment, chairman Urs Rohner said on Tuesday.

The one major blot on his copybook was the failed takeover by Prudential of the Asian arm of AIG insurance company, AIA, in 2010. Thiam was censured by the British regulator after the collapsed bid cost shareholders hundreds of millions of pounds.

Dougan’s rise and fall

Thiam’s appointment has ended three years of speculation that Dougan’s days were numbered at Credit Suisse. Shortly after taking over as CEO in 2007, Dougan was credited with leading the bank through the financial crisis relatively unscathed.

But his stock has fallen in recent years as cross town rival UBS recovered to outperform the seemingly better placed Credit Suisse. Tax evasion fines totalling $2.8 billion (CHF2.75 billion) in the United States last year were followed  by a revision of annual results last month as the bank had to put more money aside to cover future litigation costs.

Investors increasingly called into question Dougan’s staunch belief in a more sizeable investment banking operation than UBS. And  the media has weighed in with negative comments on his lack of German language skills, the amount of time he spent in New York, the size of his bonuses and reports of a rift with Rohner – which the bank denied.

Investors will have to wait several months before Thiam unveils his strategy for Credit Suisse, but most believe that change is necessary, according to Bank J Safra Sarasin analyst Rainer Skierka.

“The markets are hoping for a strategy more akin to UBS that has scaled back investment banking to concentrate more heavily on wealth management,” he told swissinfo.ch.

Speaking to the media for the first time in Zurich on Tuesday, both Thiam and Rohner emphasised the priority of growing the bank’s wealth management business in future. But Rohner also said that there were no plans to fundamentally change the current strategy that has a clear place for its investment banking business.

Tightrope walking

Bank Vontobel analyst Andreas Venditti told swissinfo.ch that he expects evolution rather than revolution when Thiam arrives later in the year. It would be a mistake to copy UBS’s strategy of massively paring back investment banking because the same business at Credit Suisse was not so badly hit during the financial crisis, he said.

“I would expect some changes, possibly in investment banking because Thiam is not so emotionally attached to this business as Dougan,” he said. “But I do not expect a very radical shift in strategy.”

“Credit Suisse’s investment banking is very different in terms of organisation, culture, size and positioning to that of UBS a few years back,” he added. “It does not necessarily make sense to change it in the same way as UBS.”

Venditti also noted that Credit Suisse’s hands are currently tied if Thiam wanted to pursue his previous inclination, shown at Prudential, to embark on major takeovers. “A major expansion of the Credit Suisse business would not be possible without major capital increases,” he noted.

The appointment of an insurance specialist as a safe pair of hands who can handle risk at the top of Credit Suisse was also greeted in Swiss political circles.

“I’m happy that Credit Suisse has found a very capable person,” Ruedi Noser, a parliamentarian with the centre-right Radical Party, told Bloomberg. “The fact that he comes from the insurance sector is a good signal.”

And Thiam rejected the suggestion that his insurance background would prove a hindrance in the world of banking. During Tuesday’s press conference he was at pains to put to bed “the notion that I don’t understand investment banking” by reeling off a list of takeover deals and bank reorganisations that he had taken part in as a McKinsey consultant.

“I am very confident that I can understand everything about investment banking,” he said.

Speaking in German, French and English at the same press conference, Thiam said he was a doer rather than a talker. And he has previously stated that he prefers to stay out of the public limelight whilst doing his job.

Asked about leadership during a 2012 interview on the BBC’s Desert Island Discs programme, he replied: “It’s a bit like walking on a tightrope because you feel all those expectations around you, and it’s rarely comfortable. But if you really believe in what you are trying to achieve it helps you go through the journey and walk without looking down.”

swissinfo.ch

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