Credit Suisse will pare back its investment bank and focus on building its wealthy client base, the Swiss bank said on Thursday, as it regroups following a string of scandals.
The bank will shutter much of its prime broking business that dealt with hedge funds such as failed investment outfit Archegos, instead ploughing an additional 3 billion Swiss francs ($3.3 billion) into its private bank for the wealthy, which will be centralised into one global business.
"Risk management will be at the core of our actions, helping to foster a culture that reinforces the importance of accountability and responsibility," said chairman Antonio Horta-Osorio.
Over the past year, Credit Suisse has been fined for arranging a fraudulent loan to Mozambique, tarnished by its involvement with defunct financier Greensill, racked up $5.5 billion in losses when Archegos collapsed, and has been rebuked by regulators for spying on executives.
That cast a cloud over the bank, prompted an exodus of key staff and fuelled speculation the group, whose stock price has languished, could even be bought by a rival.
The bank posted a 21% fall in third quarter profit and said it expected to report a net loss in the fourth quarter as it writes off its investment bank-related goodwill for a one-off charge of around 1.6 billion Swiss francs.
Credit Suisse plans to hire 500 more private bankers over the next three years, with the aim of having 1.1 trillion Swiss francs of assets under management by 2024 compared with 0.9 trillion currently.
It will simplify its structure into four divisions - investment bank, Swiss bank and asset management, in addition to wealth management, and four geographic regions - Europe, Middle East and Africa (EMEA), Asia-Pacific, Americas and Switzerland.
Thursday's announcement is the first step on a road to reining in the bank being chartered by Horta-Osorio, who took over in April as the bank grappled with the fallout of reckless earmarking.
The bank's drive to centralise its operations is drawing on lessons from some of its recent failures, including Archegos.
Earlier this year, Credit Suisse published a report blaming a focus on maximizing short-term profits and enabling "voracious risk-taking" by Archegos for failing to steer the bank away from catastrophe.
The slimmed down investment bank will focus on advising companies on deals and listings, and trading cash equities and other products that are of interest to its private banking clients.
It will cut back its emerging market lending, structured derivatives and other "non-core" market businesses as well as prime broking.
Despite long-running discussions about Archegos - by far the bank's largest hedge fund client - Credit Suisse's top management were apparently unaware of the risks it was taking.
The bank's chief risk officer and the head of its investment bank recall hearing about it first only on the eve of the fund's collapse.
Credit Suisse's financial humiliation stands in stark contrast to its cross-town rival UBS.
In the wake of massive losses and a bailout during the financial crisis, UBS successfully pivoted away from investment banking to wealth management and is now the world's largest wealth manager with $3.2 trillion in invested assets - roughly three times that of Credit Suisse.