Monday, 22 July 2019

Are Dougan and Jain drinking at the same water cooler?

Has Brady Dougan been taking too close a peek at what Anshu Jain and Juergen Fitschen are doing to their organisational structure and inadvertently making copycat moves? The divisional re-cut and the executive appointments Credit Suisse made on Tuesday do bear more than a passing resemblance to what’s going on at Deutsche Bank.

IFR Editor-at-large Keith Mullin

IFR Editor-at-large Keith Mullin

OK, I’m not seriously suggesting that Dougan is copying DB. He’s a smart cookie who knows his own mind; if anything the fact that he’s following a similar path reinforces it as the way to go in achieving regulatory and business imperatives for an industry in flux. In any case, what Dougan has done is different in that he’s layered additional responsibilities on to the executives he’s selected to run what are now two monolithic divisions within the group and saved himself some expensive regional management headcount into the bargain.

So investment bank CEO Eric Varvel has been joined as co-head of division by former co-head of global securities and fixed-income supremo Gael de Boissard. It’s eerily similar in look and feel – banker working hand-in-hand with trader – to the Rob Rankin and Colin Fan combo at Deutsche where the two run Corporate Banking & Securities. The fact that Varvel and Rankin are both Asia hands only underscores the similarities.

I’d truly love to challenge the CS and DB duos to spend a week at each other’s banks to see what differences they’d find. It would make a fabulous reality TV series.

There are nuances of difference in that beneath the co-head structure at CS, Varvel will run equities and investment banking while de Boissard will focus on fixed income. At DB, the split of responsibilities is perhaps cleaner in that Fan is head of markets and Rankin runs corporate finance. The similarities also diverge on the layering of responsibilities point in that Varvel will also act as Asia-Pacific CEO and de Boissard will be CEO of EMEA. But still …

What’s always frustrating about banks’ announcements is they leave you hanging with regard to what’s going to happen to the layer below

You’d have to assume that promoting de Boissard, a fixed-income guy to the core, suggests that Dougan isn’t contemplating doing a UBS and ditching his FICC business. Indeed, in the group announcement, Dougan said the new structure recognises the strength of the business for the bank. In the third quarter, net revenues in FICC were 178% up on 3Q11.

What’s always frustrating about banks’ announcements is they leave you hanging with regard to what’s going to happen to the layer below. Given that Varvel and de Boissard are not really relinquishing any of their day jobs, you’d imagine management changes would be minimal in the investment bank. So can we assume that Jim Amine and Luigi de Vecchi will continue to be co-heads of global investment banking? Or that de Boissard’s other co-heads of global securities: New York-based Bob Jain (equity trading and risk) and Timothy O’Hara will remain in situ? I guess we’ll have to wait for the next instalment.

Consolidating platforms

In merging private banking and asset management into a single unit, Dougan is also doing exactly what Deutsche created some months ago under Michele Faissola’s tutelage. At Credit Suisse, Hans-Ulrich Meister and Bob Shafir have been given the nod to head CS’s new Private Banking & Wealth Management division.

A lot of talk around the industry is about reversing platform proliferation and creating better touchpoints for cross-sell and enhanced relationships through fewer points of entry into the client. Having a single management structure around businesses that share overlaps offers an infinitely easier way to achieve this.

Back to my doubling-up point, Meister (who was previously CEO of private banking as well as CEO of Switzerland) will continue to head private banking in Switzerland, EMEA and Asia-Pacific as well as all Swiss client businesses. Shafir (previously CEO of asset management and Americas CEO) will maintain responsibility for asset management and continue to be Americas CEO. But he’s added Americas private banking to his list of responsibilities.

Like pretty much everyone else, Credit Suisse has spent considerable time adapting to the new capital regime, cutting risk-weighted assets, trimming its balance sheet and ditching costs

The pair also inherited the investment banking securities platform in Switzerland as well as the Solution Partners group, which grew out of the one-bank initiative of 2004–05 to pursue business alignment and divisional cross-sell. Those are heavy portfolios. Talk about having to sing for your supper!

I do wonder about the effectiveness of piling so much responsibility onto so few shoulders. I’m not convinced running or co-running a global business line and having regional management responsibility allows sufficient focus on either. Because the four guys running the two divisions all have multiple jobs, Dougan was able to save some cash by dispensing with the services of regional managers: Osama Abbasi and Fawzi Kyriakos-Saad, CEOs respectively for Asia-Pacific and EMEA, are leaving the firm. I wonder whether they’ll come to be seen as a cost saving too far.

Like pretty much everyone else, Credit Suisse has spent considerable time adapting to the new capital regime, cutting risk-weighted assets, trimming its balance sheet and ditching costs. Dougan was an early convert to the cause of finding the ‘new-normal’ in banking and says he’s already starting to see the results of his actions, even though the cost cuts are still in process.

CS delivered SFr2bn of cuts in the first half of the year relative to its 1H11 run-rate and had already upped its full-year 2013 target to SFr3bn back in July. When he unveiled Q3 results, Dougan added an additional SFr1bn of cuts, to be achieved in equal measure in 2014 and 2015.

I guess the idea is that as the restructuring winds down, the new structure will allow the bank to start refocusing fully on businesses expected to produce higher returns. That remains to be seen, of course. The Q3 results did see a dramatic increase in FICC net revenues versus third-quarter 2011 to SFr1.5bn; a 15% rise in equity trading to a tad over SFr1bn; and a 43% increase in underwriting and advisory to SFr868m. But as to whether the better numbers are sustainable, only time will tell.


Have your say

To have your say, you have to be signed in