July 30, 2020 / 6:23 AM / 16 days ago

Credit Suisse wealth management revamp aims for 10% profit boost - memo

ZURICH (Reuters) - Credit Suisse (CSGN.S) is hoping a revamp of its international wealth management, tightening its regional structure and centralising advisory and lending, will help the unit grow profits by 10% annually from next year, the bank said in an internal memo on Thursday.

FILE PHOTO: The logo of Swiss bank Credit Suisse is seen at a branch office in Basel, Switzerland March 2, 2020. REUTERS/Arnd Wiegmann

Both Credit Suisse and its international wealth management (IWM) unit have been under fresh leadership over the past year, since an acrimonious fall-out between former IWM head Iqbal Khan which led to Khan leaving for rival UBS (UBSG.S) last summer and in February cost former CEO Tidjane Thiam his job.

On Thursday, the bank announced it was wrapping its global markets and investment banking divisions into a single unit, and reported an 24% rise in second quarter net profit.

Wealth management saw earnings flag after bumper trading in the first quarter, as lower rates ate into margins and as the bank set aside money for potential loan losses.

In the internal memo seen by Reuters, wealth management executive Philipp Wehle said the unit would create three new strategic groups, concentrating its lending activities within an International Financing Group under Yves-Alain Sommerhalder, as well as setting up a new investment banking advisory group and a unit focused on sustainability.

Wehle said the changes would help the lender scale its business.

“This will allow us to take our client service to the next level and increase pretax income by 10% annually in the coming years,” he said in the memo.

Also, in a move undoing Khan’s regional split from two years ago, Wehle said northern and southern Europe would be merged into one region, led by Robert Cielen, while the Middle East and Africa would be combined under the leadership of Bruno Daher.

GROWTH POTENTIAL

Growth is to be driven by revenue increases, both in emerging markets such as the Middle East as well as in mature European markets, through increased lending and investment banking advisory services for entrepreneurs, a person with direct knowledge of the matter said.

The unit is not looking at cost-cuts as a primary profitability driver, the person said, but will look to optimise efficiencies in certain areas to fund the growth initiatives.

The new investment bank advisory group, led by Babak Dastmaltschi, will look to increase business primarily in Europe by serving entrepreneurs who own mid-sized companies, or privately held corporations with revenues between $50 million and $500 million (385.30 million pounds), on corporate deals and bond and equity issuance.

As well as promoting sustainable investments, the new sustainability group led by Emma Crystal could refine the bank’s lending activities, promoting those with sustainable impacts and restricting loans not aligned with responsible investment criteria, the person said.

In Brazil, Marcello Chilov will take over the wealth manager’s operations, aiming to increase collaboration between investment banking and the private bank, as well as optimising its onshore and offshore capabilities. Emerging Europe, previously managed by Cielen, will be led by Anton Cherny.

While asset management will see no change in leadership and structure, the unit will look to launch a number of new offerings, while certain “non-strategic businesses” will be “right-siz(ed)”.

Further management changes, one level below the management committee, will be communicated on Aug. 20, the memo said.

The moves will result in a slight reduction in the size of the management committee, two sources said, but will not focus on headcount adjustment across the unit.

Over time, the number of client-facing relationship managers is expected to grow, particularly as the bank builds out its business in emerging markets, one person said.

Reporting by Brenna Hughes Neghaiwi; Editing by David Holmes and Michael Shields

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