A prominent external investor could help finance the hiring of expensive talent and retention bonuses to existing staff, while also potentially enticing lost dealmakers to come back, the people said.
Credit Suisse has struggled to stem an exodus in its investment banking division that worsened after the multi-billion dollar collapse of prime brokerage client Archegos Capital Management. Over the past two years, more than 60 senior dealmakers have left. Most recently, Credit Suisse lost its Europe-based global banking co-head and its deputy head of M&A for Asia Pacific.
Credit Suisse’s board members have also floated the idea of giving the remaining senior dealmakers an ownership stake in the unit, creating a partnership-type model similar to other investment advisory boutiques, people with knowledge of those discussions told Bloomberg last month.
The bank has handed out at least $1.3 billion in retention packages and one-time awards to stem defections in the past 20 months and managed to rehire several executives, including Spyros Svoronos as head of global industrials and healthcare mergers and acquisitions banker Nikhil Goel.
Credit Suisse’s head of investment banking and capital markets, David Miller, said earlier this year that the bank had replenished its ranks by hiring 55 managing directors and planned to add another 40 for healthcare, tech and merger banking.
Until 2020, Credit Suisse ran its investment banking and capital markets unit as its own division, which may make it easier to separate and gives some indication of its potential. In June 2020, that unit had 3,260 employees and about 22 billion Swiss francs ($22 billion) of risk-weighted assets, indicating it utilized about $3 billion of capital. The business had more than 2 billion francs of revenue and more than 340 million francs of pretax profit in each of 2017 and 2018, before a slump in 2019 led the business to a loss.
Koerner is weeks away from announcing the results of his strategic review, which is likely to also include asset sales or market exits across units. Several of the bank’s top executives, including various business heads, had to sign special non-disclosure agreements as plans are due to be finalized, people said.
Adding urgency to the review, Credit Suisse’s shares have lost more than half of their value this year, slumping to a fresh low Monday, while the price investors have to pay to insure the bank’s debt hit record levels. That may have prompted some clients at a Credit Suisse business that lends out shares to pull back, Bloomberg reported.
Investors are worried about how the bank will cover the cost of its plan and what that would mean for its capital strength, especially during a period when the investment bank has been suffering heavy losses. Credit Suisse had a CET1 capital ratio of 13.5% at June 30, far above the international regulatory minimum of 8% and the Swiss requirement of 10%.
The Swiss government, meanwhile, has been working on a new law since March that would provide a public liquidity backstop for systemically-relevant banks. Even though the new law would not be passed until next year, officials could move to help Credit Suisse should it need liquidity, Neue Zuercher Zeitung reported.
This article was provided by Bloomberg News.