Major investment bank Credit Suisse announced on Tuesday, March 10th, that the BoD of the megabank had appointed “Tidjane Thiam” as the new CEO. He will take over this position from Brady W. Dougan.” The statement continued to say that Thiam, currently the CEO of insurer Prudential, would be taking over the position at the end of June.
Of note, the chairman of the board and the BoD composition of Credit Suisse is not changed.
A number of analysts have pointed out that this surprise move likely means a greater emphasis on asset/wealth management at Credit Suisse in the future.
Jim O’Shaughnessy: Fear Signals Created By The Reptilian Brain
ValueWalk's Raul Panganiban interviews Jim O’Shaughnessy, Chairman, Co-chief Investment Officer, and Portfolio Manager at O’Shaughnessy Asset Management. In this part, Jim discusses the fear and emotional signals created by the reptilian brain. Q1 2020 hedge fund letters, conferences and more That's very cool. For the factor to try to seek the reason why it works, Read More
More on Tidjane Thiam
Thiam is employed as the CEO of Prudential, the largest life insurer in the UK with operations in Asia and the US. Despite having no direct experience in banking, Thiam will bring financial industry experience and a fresh perspective to Credit Suisse. The BoD apparently thought his skill set was the answer given the firm is facing questions around its business model and capital allocation to investment banking, as well as the fact that non-investment banking businesses have been holding profits down.
Paul Manduca, the chairman of Prudential, noted that Thiam was an “exceptional leader” who had seen the firm through the financial crisis. Departing CEO Dougan said he had “tremendous respect” for Thiam.
What to expect from new Credit Suisse CEO Thiam
As Deutsche Bank analysts have commented, “with new management comes the potential for a new strategy.” They highlight the new CEO’s background, and say an “emphasis on asset-based annuity income streams (wealth management), probably a focus on Emerging Markets, and a further reduction in the investment bank, especially FICC.”
The analysts note this strategy dovetails well the backdrop of higher leverage ratio requirements and “RWA inflation”. However, whether a new CEO and a new strategy will result in a capital increase is unclear. They note that ” trade-off and decision between IB shrinkage/earnings loss/repositioning costs on the one hand and higher PE multiples/less capital consumption on the other hand will be key in this context.”
Analysts at UBS state:
Given Thiam’s background, we think Credit Suisse’s strategy could shift even more towards asset/wealth management. An acceleration of this strategy could also make sense against the backdrop of likely higher leverage ratio requirements and “RWA inflation” (as discussed in previous research). Whether the management change and a potentially changed strategy could result in a capital increase, remains uncertain. The trade-off and decision between IB shrinkage/earnings loss/repositioning costs on the one hand and higher PE multiples/less capital consumption on the other hand will be key in this context. Important to remember that the chairman/board composition is unchanged.