The scandal-ridden bank's international business suffers and the shares just keep falling. A little-noticed change in its Swiss business has potentially large implications.

A small detail has seemingly fallen by the wayside in the media frenzy related to «Suisse Secrets» and its reporting of a sanctioned Russian oligarch's ostensible accounts with Credit Suisse.

It made a surprising change in the Swiss unit by reorganizing it. But, importantly, it did not adopt a matrix structure, as it did for the rest of the group under its new strategy, as finews.com reported at the end of February.

Swiss-based private banking activities, which should have moved into the global Wealth Management (WM) division headed by Francesco De Ferrari are instead being integrated into the «Swiss Bank», a business holding retail, corporate and institutional clients. Serge Fehr is to be responsible for the domestic private banking activities and he will report to André Helfenstein, CEO Swiss Bank and the Switzerland Region. He will also become part of WM's management team.

Entrepreneurial Clients Taken Aback

That is not only a surprising exception to the rule. It will also allow the new Swiss unit to have an integrated wealth management offering - the core business that the bank wants to generate additional revenues from in the future under its overhauled strategy. The step was noticed by industry observers, and it has prompted speculation about the troubled bank.

Many of the observers are asking themselves whether Credit Suisse is keeping a door open for the bank to make a radical return to its Swiss roots.

An idea has been making the rounds since the recent, forced resignation of its chairman, particularly as many business clients have apparently been taken aback by the situation the bank now finds itself in. They are increasingly at odds with the direction it is taking even though it claims to be a bank for entrepreneurs. For them, the view was that it needed to become more Swiss.

Tower of Strength

But can the bank return to be a so-called «Escher-Bank»? That was how its predecessor was informally dubbed, calling to mind Alfred Escher, the 19th-century Swiss politician and businessman who founded numerous seminal institutions in the country, including Credit Suisse.

At the end of 2021, the international wealth management and investment banking business was paralyzed. CEO Thomas Gottstein said then that 2022 would be a transitional one even though the Swiss business (then called the Swiss Universal Bank, SUB) delivered a positive performance in a difficult fourth quarter. Pre-tax profits were up 41 percent from a year earlier.

As had been the case for years, the domestic market proved to be a tower of strength. «Switzerland paid for the dividend», investors told each other, almost in unison. Under former CEO Tidjane Thiam's restructuring, the SUB business was the only one that never had any of its targets lowered. Market observers noticed that. «The last year was a comparatively trouble-free one for the Swiss business of Credit Suisse», said Zuercher Cantonal Bank banking analyst Michael Kunz.

Trend Points to All-time Lows

Market experts must be getting concerned. Following the Ukraine invasion, the share price of Switzerland's second-largest bank fell on Friday to below 7 Swiss francs. According to Swissquote, the record low for the bank's shares is 6.18 francs. That raises the question as to whether Gottstein will be around for a full year to manage the turnaround. As finews.com wrote at the end of February, its shares had then already hit pain thresholds. 

Credit Suisse largest shareholders will be key. Anglo-Saxon financial investors and wealthy conglomerates and sovereign investment funds from the Middle East. They still support the bank's new strategy as announced in November. But would a change be possible if they exerted pressure? «Credit Suisse often left itself some latitude within its structures in recent years», said Kunz. «The new strategy is not written in stone for all time.»

More Predictable Business 

To concentrate on the Swiss business and the «Suisse» in Credit is not that unreasonable from an investor perspective. To shrink the international business and concentrate on a Swiss bank could be an interesting solution in the long-term as it would make the business more predictable, Kunz adds.

«But I would find a step like that very surprising given how the bank perceives itself and the importance of the international business», he continues. And separating them would be extremely complex.

Credit Suisse has tried something like that before in a different context. In 2015, then CEO Thiam was thinking of floating a stake in SUB on the Swiss Exchange in order to get bank investors to support an urgently needed capital increase. The step, however, was silently mothballed when enough money started rolling in.

CEO Expertise

Will those plans be taken out of the drawer again? Credit Suisse declined to answer when asked about it. Sources around the bank said that 2022 will remain a transition year and that the new strategy remains in place. The bank has enough capital now, unlike in 2015. But if the shares were to fall further, that would also eat up some of the capital base.

The bank is headed by a CEO who has publicly floated a Swiss bank. And seemingly twice at that. Once as the Swiss head under Thiam, and in 2013 as investment bank advisor for Cembra Money Bank's IPO.