Credit Suisse, the investment banking giant, is going through a $440m reorganization. It will drop its prime brokerage unit, reduce its investment banking services, and eliminate its financial services. This follows huge losses due to both Archegos hedge fund collapse and Greensill financial services firm collapse, as well as a variety of scandal-related penalties.
The collapse of Greensill hedge fund Archegos has caused huge losses for the Swiss banking giant. (Photo taken by Fabrice COFFRINI / AFP). (Photo by FABRICE COFFRINI/AFP through Getty Images) AFP via Getty Images
The Key Facts
The Swiss bank announced Thursday that it will concentrate on its wealth management business following a 9% increase in assets under management over the past year to $923 billion (843 trillion Swiss Francs). Credit Suisse reported a pre-tax income in the third quarter of $1.09 billion ($1.09 billion), and profits in the same period in 2020 fell 21% to 434 millions Swiss francs ($475million). Bloomberg reports that the bank's restructuring will see it split into four separate units starting next year: Asset management and wealth management. This follows a difficult year for the bank, which was under regulator scrutiny after it suffered unacceptable losses of $5.5 billion. Archegos Capital Management, which Bill Hwang founded to manage his assets, also collapsed. Credit Suisse, which was a creditor to Greensill Capital's failure, suffered even more reputational damage after the Australian-based financial services company folded. The bank had to freeze billions of investment funds and was fined $475 millions for a corruption scandal involving Mozambiques Tuna Bonds. According to the WSJ, restructuring will take place over three years.
In April, Antonio Horta Osorio, the newly appointed Chairman of Credit Suisse, announced the bank's overhaul. Credit Suisse was among the most affected banks. Nomura and Morgan Stanley also suffered huge losses due to the collapse of Archegos. Wall Street lost more than $10 billion due to the obscure and secretive New York-based hedge funds. Archegos defaulted in margin calls and triggered a $30 billion sale of media- and entertainment companies it had invested.
The Firm That Shakes Financial Markets With The $30 Billion Firesale Has Almost No Information (Forbes).
Credit Suisse Revamps Business in Post-Archegos Overhaul (Forbes)