ZURICH/LONDON (Reuters) - Credit Suisse CSGN.VX is preparing to dismantle its sub-scale asset management unit, integrating the business into its larger private bank and investment bank to clamp down on costs, two people within the Swiss bank told Reuters.
The move is “a direct consequence” of Credit Suisse not being a major asset management firm, one of the sources within the asset management unit said.
The Swiss bank’s asset management activities, which have 360.5 billion Swiss francs ($384.96 billion) under management and less than 3,000 employees, are dwarfed by fund industry giants such as BlackRock (BLK.N), which manages $3.56 trillion and employs nearly 10,000.
A third source told Reuters a final decision on the unit’s fate has not been made. It was not immediately clear how many jobs would be lost through the move but a source within the asset management division said “it’s all about costs.”
The streamlining comes as Credit Suisse is already cutting 3,500 jobs across the bank and in July announced plans to bolster its capital base by 15.3 billion Swiss francs. The bank said at the time it planned to dispose of the asset management division’s private equity investments, due in part to new U.S. regulation overseen by Paul Volcker.
Also in July, Credit Suisse announced an extra 1 billion francs of cost cuts after it reached a 2013 target of slashing spending by 2 billion francs early.
Under Chief Executive Brady Dougan, Credit Suisse has been struggling with sluggish earnings partly due to a dearth of investment banking activity. In June, Credit Suisse suffered an unusually public rebuke from the Swiss National Bank, urging the bank to bolster its capital, which led to its July measures.
The asset management integration is a “logical continuation” of the capital measures announced in July, the other source familiar with the bank’s thinking said.
The sources declined to be identified.
Credit Suisse declined to comment.
Credit Suisse’s asset management unit, led by Robert Shafir, is far smaller than the private bank and investment bank, which each employ more than 20,000 staff. The asset management unit posted 133 million Swiss francs ($142.45 million) in second-quarter pre-tax profit, compared to 775 million francs from the private bank and 383 million francs from the investment bank.
Shafir was Credit Suisse’s top earner last year at 8.5 million francs.
Executives at Credit Suisse’s asset management unit said a dismantling does not mean an exit from the asset management areas the Swiss bank remains active in, such as discretionary mandates for wealthy clients.
Fund businesses have been in question since the Volcker rule was passed in 2010. The rule, which was mandated by the 2010 Dodd-Frank Act and named after former Federal Reserve Chairman Paul Volcker, is expected to be finalised by the end of this year. It is aimed at preventing banks from taking risky bets for their own gain rather than on behalf of their customers.
Credit Suisse had already whittled down the asset management unit, in 2008 selling part of its funds business to U.K. fund manager Aberdeen Asset Management ADN.L. The Swiss bank in July sold a 7 percent stake in Aberdeen that it acquired through that all-share deal.
Reporting By Katharina Bart and Sophie Sassard. Editing by Jane Merriman