Several of the world's biggest banks have been restructuring of late. The changes have been showing up both in the focus of their various operations and the employees who carry out those operations. On both fronts, most of the megabanks are downsizing—eliminating overly risky or unprofitable banking divisions and dismissing company employees (including executives) who bear responsibility for scandals or under-performance.
Now, you can add Credit Suisse Group AG (NYSE:CS) to that list, as the company plans to revamp is earnings strategy over the next 2 to 3 years.
Credit Suisse announced a big change in direction this week for its future plans. It came conspicuously (and perhaps not coincidentally) at the same time as its third-quarter earnings report fell short of analysts' (and shareholders') expectations.
Reshuffling the Deck
One of the major changes are the proposed expansion of the bank's wealth management division, which posted a disappointing quarter-on-quarter decline. In order to grow this arm of Credit Suisse's operations, the firm will sell shares worth more than 6 billion Swiss francs ($6.3 billion) in order to raise the necessary capital. It will also be slashing costs by cutting about 2,000 jobs from its U.K. and U.S. divisions. It's not just the lower-tier employees who are getting the boot, either: Credit Suisse is dismissing 3 of its executive board members as it restructures its operations.
Many of the company's investors, as well as other market observers, aren't convinced by the bank's new strategy.
Shares were down as much as 5% on Wednesday before those losses were pared, with the share price closing right around $25/share, more than 3.75% in the red, by the end of the trading session. The stock did gain 15¢ per share early on in after-hours trading.
As yet, Credit Suisse has not seen a turnaround from naming a new CEO, Tidjane Cheick Thiam, in July. The quarterly results showed a year-on-year decline of 24% in overall net income, as well as a 31% drop in profits from its Private Banking & Wealth Management division, specifically. This is what prompted the bank to strategically pivot toward pursuing growth in this portion of its operations, as well as seeking to expand further into the Asia-Pacific market.
Thiam did not, however, disclose many specifics about how these two goals would be accomplished. When pressed for more details, he even commented that only a fool would commit to projecting profits that he or she can't control.
Credit Suisse is among Switzerland's leading wealth management and financial services firms, and carries the Swiss reputation for expertise in finance and banking.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.