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Credit Suisse needed urgent action the day before the change of president. The question arises as to whether the new president will hold on to CEO Thomas Gottstein.
Today Gottstein delivers his first annual result as chief operating officer. The numbers for him and his team are a mess.
In the fourth quarter there was a loss of 350 million francs at the group level. For the full year, the profit collapsed by 22 percent.
The 2.7 billion Swiss francs it made is not even half that of its archrival UBS. This reported a record result 3 weeks ago.
Asset management is a particular concern. Ironically, CS’s flagship division lost hugely in 2020.
Revenue generated with wealthy private clients amounted to nearly $ 14 billion, 8 percent less than in 2019.
In the fourth quarter, CS Wealth Management really went downhill. Yields plummeted by a whopping 24 percent.
A real shock.
The opposite is true at UBS. There, revenue in global wealth management increased by more than 20 percent throughout 2020.
On the other hand, investment bank CS did just as well as UBS. This gained noticeably more over the year and in the last quarter as well: plus 19 percent in 2020 revenue, the same amount in the last quarter.
The jump in business and corporate consulting is not what Gottstein wants. The chief operating officer is mandated by the board of directors to make asset management a pearl.
This already makes up the majority, thanks to a big business in the Far East. But even there, in Asia, the trend is pointing in the wrong direction. In the last quarter, profits fell slightly and customers fled.
What about CS, what is Gottstein doing wrong?
Obviously CEO # 2 doesn’t have any plans. At least not one that puts the bank on a promising new footing.
Rather, Gottstein hopes for better times. In 2020, “the bank was in a good starting position to be able to register growth in 2021 and beyond,” according to today’s statement.
How? Gottstein & Co. lists four points.
“Creation of a global investment bank”, “Introduction of the new function Sustainability, Research & Investment Solutions”, “Integration of the Neue Aargauer Bank into Swiss Universal Bank”, “Introduction of the integrated function Chief Risk and Compliance Officer”.
Integrated investment bank, eco-fund, a Swiss brand, risk and compliance merged – all things organizational, but nothing strategic or innovative, no cuts and no focus.
Stone of God in the mist.
The director of CS was a negotiator all his life. He obtained the large contracts for company mergers and IPOs.
Now it is challenged in a very different way. You have to build a new CS. The old man is sick.
That seems like too much for Gottstein. Instead of presenting a compelling plan ahead, he paints it pink, incomprehensible given the numbers.
“Our asset management divisions had strong operating performance due to higher transaction-related revenue,” writes CS, followed by: (Emphasis on intellectual property)
“These areas reportedly registered a decrease net revenue by 8% year-on-year to 13.6 billion Swiss francs. Transaction related revenue increased 3%, but decreased 4% lower income from commissions and recurring fees and 4% lower Interest income is more than balanced. “
Strong operating performance, everything going wrong? Rosa speaks, so to speak.
Gottstein’s problem is that he has to build the new and clean up the old at the same time.
Bad loan write-offs skyrocket. In 2020, they totaled 1.1 billion francs and there is no end in sight.
According to CS, these loan loss provisions are “almost four times higher than our 11-year average of CHF 280 million, which is due to the negative performance of our corporate loan portfolio and the application of the current methodology of expected credit losses. (CECL). “Be.
CS is most concerned about developments in its local market, Switzerland. Customers flee there.
The outflow of funds from private clients at the Swiss Universal Bank amounted to 5.9 billion last year, of which 2.1 billion in the fourth quarter alone.
This was more than offset by higher inflows from institutional clients such as pension funds.
But CS is never paid to manage their assets as much as wealthy private clients.
According to the profit. Before tax, this was almost halved in Swiss unit, from 867 to 487 million.
So also in the supposed pearl called Switzerland. That shows what hit him.
Anyone who has attested to the CS that Gottstein’s predecessor Tidjane Thiam had completely cleaned up, as was said a year ago, sees himself brutally deceived.
Only in the last quarter of last year, CS under Gottstein carried out extraordinary copies in skyscraper dimensions.
Namely, for “litigation of CHF 757 million, costs related to restructuring and real estate sales of CHF 78 million, a negative net effect on our profit before tax of CHF 108 million as a result of rate movements exchange rate and one item, including an impairment of our minority stake in York of 414 million Swiss francs ”.
A total of more than 1.35 billion “hazardous waste”, incredible.
To at least lighten the black hole a little, CS made bookmarks by “a gain from the revaluation of our stake in SEIS of CHF 158 million and a gain from the revaluation of our stake in the Allfunds Group of 127 million CHF “.
Polished Table Silver – This brings Gottstein and his troops closer to the 1 billion special copyists.
No more. A billion dissolved in the air, and billions of other explosives are sleeping on the balance sheet.
Rigorous action would be needed, most of all a compelling plan on how CS can finally gain ground in the new world.
So far, Gottstein has shown no such path.
