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Credit Suisse to split investment bank, form bad bank to hold high-risk assets: Report

FILE PHOTO: The logo of Swiss bank Credit Suisse is seen at an office building in Zurich, Switzerland September 2, 2022. REUTERS/Arnd Wiegmann/File Photo (REUTERS)Premium
FILE PHOTO: The logo of Swiss bank Credit Suisse is seen at an office building in Zurich, Switzerland September 2, 2022. REUTERS/Arnd Wiegmann/File Photo (REUTERS)

Credit Suisse is reported to be divided into three sections: a bad bank to hold high-risk assets, the advisory division and the rest of the company.

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Credit Suisse Group AG has developed proposals to divide its investment bank into three, the Financial Times reported on September 22. According to the article, which cited people familiar with the preparations, the bank is trying to sell profitable divisions like its securitised products business in order to avoid a damaging capital raising.

The new strategy, anticipated to involve thousands of job layoffs, will be unveiled by the board and management team on October 27 at the bank's third-quarter results, as per the report. An after-hours request for comment from Reuters was not answered by Credit Suisse.

Also Read: SpiceJet, Credit Suisse end dispute over unpaid dues

Credit Suisse Directors Michael Klein and Blythe Masters previously hinted that the Swiss bank might give investment bankers an equity part in the company, which was seen as indicating a spin-off of the division. According to a previous Bloomberg article, the board was thinking about revitalising the First Boston name for the investment bank.

According to the most recent suggestions being looked at, the investment bank would be divided into three sections: a "bad bank" to hold high-risk assets, the advisory division and the remainder of the company.

“We have said we will update on progress on our comprehensive strategy review when we announce our third quarter earnings," Credit Suisse said in a statement. “It would be premature to comment on any potential outcomes before then."

Also Read: Credit Suisse heads to court with Sanjeev Gupta after debt talks stall

The same sources claim that the board has pondered recreating the strategic resolution unit to gather high-risk assets and non-core companies that don't fit with its new strategy of concentrating on wealth management.

The persons familiar with the board's thinking said that while suggestions have been proposed, they are not considered to be a top priority.

Also Read: The IIP is broken, here’s how to fix it

Apollo Global Management Inc. and BNP Paribas SA are among investors showing interest in acquiring at least part of SPG business, sources told Bloomberg last week. The Zurich-based firm is exploring deals to sell the entire business, while potential investors may pitch to acquire specific portfolios or risk classes, the people said, asking not to be identified because the matter is private.

(With agency inputs)

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