Dive Brief:

• Credit Suisse named Ulrich Körner as its CEO on Wednesday, effective Aug. 1.
• Körner, who has served since 2019 as chief of Credit Suisse’s asset-management unit, replaces Thomas Gottstein, a 23-year veteran of the bank.
• Credit Suisse on Wednesday also announced a strategic review that would de-emphasize its investment bank and ramp up cost-cutting measures.

Dive Insight:

Credit Suisse’s leadership change and strategic shift came as the bank Wednesday reported a $1.7 billion net loss in revenue during 2022’s second quarter — a 29% drop from the same three-month span a year ago. About $1.25 billion of that loss came from the investment bank, and Credit Suisse warned it expected a further loss in the third quarter from that segment of its business.

Meanwhile, the bank said its investment-banking chief, Christian Meissner, would shift to a role centered on the unit’s strategic transformation. In his place, the bank named David Miller and Michael Ebert to co-lead the investment bank.

In what could be a complication to straightforward cost cuts, Credit Suisse, according to Bloomberg sources, has offered multiyear guarantees to keep some managing directors within its investment banking and capital markets group. 

Beyond cutting costs and taking the focus off its investment bank, Credit Suisse’s strategic review — its second in the past year — is meant to redirect the bank’s wealth and asset-management operations and overhaul its compliance and risk management functions. 

"We will have a highly competitive banking business and we will align the markets business better to serve the needs of our wealth management and Swiss clients,” the bank’s chairman, Axel Lehmann, said Wednesday, according to CNBC.

Lehmann did not speculate on the number of job losses the new strategy would entail but said more details would emerge with the bank’s third-quarter earnings in October.

As part of the plan, the bank aims to reduce its cost base to below $16.1 billion in the medium term, from $17.6 billion, the Financial Times reported. But more than $800 million of that could stem from a technological overhaul, according to Reuters.

The wire service reported in May that the bank was considering asking its investors for a cash injection or, alternately, weighing a sale of one of its divisions, such as asset management.

Lehmann in June shot down rumors that State Street was preparing to acquire Credit Suisse. 

When asked Wednesday by CNBC whether he planned to merge or sell the company, Lehmann said "that is a clear no.”

Lehmann denied reports in May that Credit Suisse’s board had discussed replacing Gottstein. On Wednesday, he called Gottstein "a great guy" who did a "great job," according to CNBC. 

However, “we as a company were under fire and he as a CEO was under fire,” Lehmann told Bloomberg. “Thomas and I came to the conclusion that it is better to have new leadership; but also for personal reasons he decided to step down.” 

In a statement, Gottstein cited “personal and health-related considerations” as one reason for his departure. “In recent weeks … after discussions with Axel and my family, I concluded that now would be the right time to step aside and clear the way for new leadership to fully embrace the important initiatives announced this morning, which I wholeheartedly support,” he said.

Outgoing boss

Gottstein’s departure punctuates an 18-month span during which Credit Suisse turned over its entire C-suite and half of the directors on its board, according to Bloomberg.

Gottstein ascended to the CEO role in February 2020, after his predecessor, Tidjane Thiam, resigned amid revelations that the bank hired a private investigator to tail star banker Iqbal Khan after Khan left Credit Suisse for rival UBS.

During his tenure, Gottstein guided Credit Suisse through the COVID-19 pandemic’s early days but also weathered twin scandals last year stemming from the collapse of Greensill Capital — which forced the bank to close a $10 billion suite of investment funds — and Archegos Capital Management, whose exposure handed the bank a $5.5 billion trading loss.

Gottstein, who promised the bank a “clean slate” when he took over in 2020, served under three chairmen during his two-year CEO stint. Urs Rohner left last year after 10 years as chair, and the bank turned to former Lloyds chief António Horta-Osório to lead the bank out of its doldrums. The move backfired when, nine months later, Horta-Osorio stepped down after repeatedly violating COVID-19 quarantine rules, in addition to other disputes with the bank’s board members.

Incoming boss

Körner joined Credit Suisse in March 2021 to replace Eric Varvel, the asset-management chief who was ousted over the Greensill debacle.

Lehmann described Körner as “ideally positioned” to lead Credit Suisse’s upcoming transformation. He developed a reputation as a “fixer” during a decade at UBS — though some observers reacted with surprise at Körner’s ascent Wednesday: Asset management is by far the smallest of Credit Suisse’s four divisions, and Körner’s career suffered a bump in 2019, when a management reshuffle at UBS forced him out in favor of Khan.

“I am looking forward to … devoting my full energy to execute on our transformation,” Körner said in a statement Wednesday. “This is a challenging undertaking but at the same time represents a great opportunity to position the bank for a successful future and realize its full potential.”

Credit Suisse’s strategic review prompted analysts from Citi to draw comparisons to UBS’s 2012 move to transition to a similarly “capital-light, advisory-led banking business.” Lehmann shot down that parallel in an interview with Bloomberg, saying, “We are on a different path.”

Litigation set-aside

Credit Suisse’s investment bank is not the only silo that suffered in the bank’s earnings report Wednesday. Revenue in the bank’s wealth-management unit saw a 34% year-over-year decline, and asset-management revenue fell 25%. 

The bank also set aside $451 million in provisions for litigation, it reported Wednesday, adding that up to $200 million of that could go toward U.S. investigations into improper use of personal messaging platforms. That amount mirrors expected penalties for Morgan Stanley, Bank of America, Citi and others. Credit Suisse in December asked its employees for access to their personal devices if they’re used to communicate with clients or co-workers. That move came as JPMorgan Chase took a $200 million penalty for related circumstances.