Now the Pressure Is on Credit Suisse

Deutsche Bank and Standard Chartered impressed with sweeping changes, putting pressure on Credit Suisse CEO Tidjane Thiam to come up with something equally spectacular on Wednesday. And that's more than an increase of the Swiss bank's capital.

In the past weeks, the impending presentation of Credit Suisse's new strategy had experts primarily think about a capital increase, as reported.

Sunday afternoon however made it clear that this won't be enough and CEO Tidjane Thiam on Wednesday has to come up with significantly more to match the expectations of the financial market.

Out of the blue, Deutsche Bank over the weekend announced the biggest change in its history. Germany's «Handelsblatt» said lightning had struck the towers of the bank in Frankfurt. No stone was left unturned, as reported.

Drastic Measures

The management of Deutsche decided to dissect the bank, creating new units and responsibilities. Investment banking, hitherto left untouched, will be split up and a large number of managers will have to leave. John Cryan, co-chief executive officer at Deutsche Bank, has clearly opted for a radical turnover – to the surprise of experts.

The drastic measures seem proof enough that Deutsche has gone astray and that its management team of Anshu Jain and Jürgen Fitschen wasn't going to get the institute back on track. Yesterday's truths have become obsolete.

A second industry powerhouse is adding its weight to underline the theory, Standard Chartered. CEO Bill Winters will also shake up his company, creating new units and adding pressure on employees to increase their performance by reducing the number of managers by a quarter from 4,000, as was reported by several media outlets.

Well Balanced?

Brady Dougan, Thiam's predecessor on the CS throne, a mere five months ago told «Finanz und Wirtschaft» that his bank was singularly well balanced, words that carry a hollow ring today.

In 2013, Dougan boasted that his institute, Switzerland's second biggest, satisfied the demands by Basel III as one of the first banks worldwide. Today, a massive capital increase seems necessary, accompanied by a reorganization and job cuts, a new regional structure and the sale of units. The bank can't have been that well balanced after all.

Tidjane Thiam 505

The Little Extra

However, Tidjane Thiam (pictured) can't just inject new money and cut costs. He needs to do more, come up with something spectacular, increasing the attractiveness of Credit Suisse to investors. Everything else is mere arithmetics.

The loud bang necessary won't make everybody happy of course – job cuts, reorganizations and performance targets rarely do. Three areas stand out as candidates for a potential surprise:

  • The Swiss business has to be adjusted in a way that makes its highly profitable in all parts and led by a charismatic leader visible across the banking industry.
  • Thiam has to be able to rely on a crew visibly free of favoritism.
  • The CEO needs to underline the attractiveness of Credit Suisse with a (major) takeover (in Asia) as proof for the quantum leap achieved by the bank.

With Deutsche Bank's announcement of its reorganization over the weekend, the pressure on Credit Suisse and Thiam to come up with something substantial has increased. The tension is rising and Wednesday's presentation in London eagerly awaited.

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