September 24, 2013 12:55 pm

Credit Suisse to rejig private bank

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Credit Suisse’s private bank will exit or partially withdraw from about 50 peripheral markets worldwide by the end of this year, as the newly configured division attempts to bolster its profitability.

The move will centre on markets in Africa and central Asia where the returns do not justify the costs of vetting clients: banks are under mounting pressure to ensure that they do not deal with the holders of ill-gotten wealth.

However, Credit Suisse will also stop serving less wealthy customers in some western markets where the bank does not have a large enough volume to serve small clients profitably.

At the end of the second quarter, Credit Suisse’s private bank managed assets worth SFr1.3tn ($1.4tn). The Swiss bank declined to reveal the value of the assets affected by its pullbacks. But it said that the withdrawal, first reported by the Swiss daily Tages-Anzeiger, was part of previously announced efficiency plans.

“This initiative affects a number of countries which are either very small or where we have a small number of clients. Our market review considered the overall cost of doing business, including regulatory and operational aspects,” a spokesman said.

“We believe that this initiative will strengthen our focus and will allow us to dedicate resources to growth markets and strategic client segments.”

Credit Suisse is not alone in leaving markets where vetting procedures are challenging and expensive. HSBC has recently pulled back from various activities in Latin America and Asia. And Citigroup’s recent decision to withdraw from rural west Texas has been seen by some as a move to mitigate the risk of being caught up in illegal cross-border business with Mexico.

Kinner Lakhani, an analyst at Citi, said Credit Suisse’s efforts to improve the profitability of its private bank were an important step in the bank’s cost-cutting plans.

“They’ve ticked the box on the investment bank, but there hasn’t been much evidence in recent quarters of progress at the private bank. The market has been focused on this, and today’s move shows that Credit Suisse are serious about delivering,” he said.

Last autumn, Credit Suisse combined its private banking and asset management operations into one division, co-headed by Hans-Ulrich Meister and Robert Shafir.

The Swiss group has already achieved SFr2.7bn in savings as part of a cost-cutting programme intended to shrink its cost base by SFr4.4bn by 2015. About SFr750m of the remainder is due to come from the private bank.

At the same time as cutting costs, though, Credit Suisse has also been increasing its efforts to orient its private bank towards the very rich – or so-called ultra-high net worth individuals.

This year it bought the European and Middle Eastern wealth management unit of its rival Morgan Stanley, in a deal that included $13bn in assets under management, and about 60 client managers, most of whom cater to the very wealthy.

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