Credit Suisse names its first black CEO
Hiring of Tidjane Thiam could signal move away from risky investment banking
ZURICH— Credit Suisse Group’s appointment of Tidjane Thiam as chief executive officer boosted shareholder expectations that the firm will shift away from high-risk investment banking toward its more profitable money-management businesses.
Brady Dougan, the U.S.-born investment banker who has led Switzerland’s second-biggest lender since 2007, has faced pressure to reduce the focus on the securities unit as rules that demand higher capital hurt returns and weakened the company’s buffers.
The switch to Thiam, the first black chief executive officer of a European bank, who has spent the past decade running insurance businesses, is a signal that the firm may follow competitors including UBS Group in making deeper cuts to the investment bank.
“Dougan, the dyed-in-the-wool investment banker, is being replaced by an expert on wealth and asset management and insurance,” said Andreas Brun, an analyst at Zuerch- er Kantonalbank. “This could also give rise to a paradigm shift.”
Credit Suisse said Tuesday that Dougan will step down at the end of June. Thiam, 52, a dual citizen of France and Ivory Coast, joins from Prudential, Britain’s largest insurer by market value. The stock has more than tripled during his tenure as CEO.
“I have a lot to learn,” Thiam said in an interview with Bloomberg Television’s Francine Lacqua. “It’s a very different institution.”
Given his background, the new CEO is likely to focus on wealth management and favour asset-based income streams over revenue from trading, said Matt Spick, a Londonbased analyst at Deutsche Bank, adding that this would be positive for the bank’s share price.
Dougan, who steered the company through the financial crisis, has been criticized for not cutting the capitalintensive businesses at the investment bank enough, as Credit Suisse’s balance-sheet strength trails that of competitors. A $2.6 billion (U.S.) fine last year for helping Americans evade taxes prompted speculation that the bank would need to raise capital.
While the firm has increasingly focused on wealth management, cuts at the trading businesses have come bit by bit. The investment-banking businesses that Credit Suisse intends to keep have more than twice the risk-weighted assets that UBS allocates to its securities businesses, for example. About half of Credit Suisse’s 25.8 billion francs ($32.8 billion) of revenue came from investment banking in 2014, compared with 30 per cent of the 28 billion francs ($35.6 billion) of sales at UBS.
Credit Suisse is the fourth-biggest wealth manager in the world, while UBS is the market leader, according to the annual ranking by Scorpio Partnership.
Dougan, 55, an Illinois railway dispatcher’s son, started his career at Banker’s Trust Corp. He moved to Credit Suisse in1990 as part of a team led by Allen Wheat, where they set up a derivatives unit called Credit Suisse Financial Products. He was the first American to serve as sole CEO of the Swiss firm.
Dougan “was on a good track for a while during the crisis,” said Peter Stenz, who helps manage 53 billion francs at Swisscanto Asset Management. “A little less so afterward. He may have held on to investment banking a bit too long.”
Dougan was a “victim of his past,” said Ed Firth, head of European bank research at Macquarie Group Ltd. in London. He “struggled with the fact that the business he’d grown up in and played a key part in building was no longer one that investors liked.”