ZURICH (Reuters) - Credit Suisse Group AG’s CSGN.VX new Chief Executive Tidjane Thiam signalled a strategy shake-up on Thursday, designed to focus on banking for the world’s wealthy, particularly in Asia, and away from riskier securities activities.
The Swiss bank’s shares jumped more than 7 percent to a 15-month high, boosted by better-than expected second-quarter results including a net 14.2 billion Swiss franc ($15 billion)inflow into its private banking arm catering to the super-rich.
Former Prudential Plc (PRU.L) boss Thiam took over at the Zurich-based lender only three weeks ago. Investors have been watching for any clues on his plans, as well as any hints of a widely-expected move to tap shareholders for additional capital.
Thiam said he was leading a strategic review and would set out a strategy before the end of the year.
He indicated he will focus on a move towards less volatile wealth management, where Credit Suisse is the fourth-biggest global player by assets after UBS UBSG.VX, Morgan Stanley (MS.N) and Bank of America Merrill Lynch (BAC.N), according to wealth management consultant Scorpio Partnership.
“We will put the emphasis on the private banking and wealth management business because it’s more capital-light and (has) better returns,” Thiam told a news conference. “But for that to be successful we also need an investment bank that is well performing.”
Thiam also stressed the importance of Asia Pacific, the world’s fastest-growing region for private wealth.
“Asia has 70 percent of the world’s population and I believe that any company that locks itself out of serving 70 percent of the world’s population is on a road to nowhere,” he said.
The bank’s Asia chief told Reuters Credit Suisse would consider raising headcount or buying a smaller peer to build up its private banking business, in a region where pretax profit doubled in the first half of this year.
Credit Suisse bolstered its capital slightly in the second quarter to 10.3 percent of risk-weighted assets from 10 percent, but still lags behind many rivals.
“You have to show at least 11 percent not to have a discount on your share price,” said Zuercher Kantonalbank analyst Andreas Brun.
Thiam said he would first look to boost capital internally by improving efficiency and possibly getting rid of cash-intensive units. But he left the door open for a cash call.
“Should we need to raise capital, our ability to do so will be a direct function of the quality of the strategy we have,” Thiam said.
One high-ranking Credit Suisse banker said Thiam’s initial focus would be to scrutinise mainly investment banking areas like “macro” products, which include interest rate-linked products and currencies, and prime brokerage, or dealing for hedge funds.
Credit Suisse will judge whether these areas help provide business to other units as well as looking at their cost of capital.
For the three months to June 30, Credit Suisse said net income reached 1.1 billion francs, compared with an average forecast of 783 million in a poll of six analysts.
In the same quarter last year, the bank had posted a 700 million franc loss due to penalties from a May, 2014 settlement with U.S. authorities over tax evasion charges.
Shares were up 7.7 percent by 1200 GMT (1.00 p.m. BST), well ahead of a 0.3 percent rise in the European banking sector .SX7P, having earlier touched their highest since April 2014.
The 14.2 billion net inflow into Credit Suisse’s private banking arm was higher than the forecast 5.45 billion. By contrast, its fixed-income business was hit by risks ranging from Greece’s sovereign debt crisis to the timing of a long-awaited U.S. interest rate hike.
Amid talk Credit Suisse will move away from away from riskier securities activities, Thiam said the bank will always be present in fixed income in some way.
Additional reporting by Katharina Bart; Editing by Jason Neely and David Holmes