There are three months until Tidjane Thiam turns up at Credit Suisse and Brady Dougan steps down to run marathons or start a ranch in Illinois. That gives plenty of time for Credit Suisse employees to fret about likely changes under their new boss. If you work in the investment bank, the new regime will almost certainly be bad. This is why.
Thiam knows nothing about investment banking. A McKinsey Consultant, bureaucrat and government minister with an MBA, he's spent the last five years as chief executive of an insurance company.
Unfortunately, a lack of investment banking knowledge seems to have been Thiam's appeal. Announcing his appointment, Credit Suisse chairman Urs Rohner said Thiam's "extensive international experience" in "wealth and asset management" were good things. - There was no mention of investment banking. None at all.
Given Thiam's background, analysts at Deutsche predict, an emphasis on asset-based annuity income streams (wealth management)... over trading income streams." They point out that this stability will be good for Credit Suisse's share price - which might explain why it's risen by 7% this morning.
Thiam is big on Asia. At Prudential, he successfully focused on selling insurance products to the fast growing and under-insured middle classes. The company was the market leader in around half the countries it operated in.
At Credit Suisse, it's therefore highly likely that Thiam will seek to develop the bank's Asian wealth and asset management businesses. The bank already named Benjamin Cavalli as its new Singapore-based head of South East Asian private banking last October. Finance Asia notes that Asia Pacific only accounts for 10% of the assets under management at Credit Suisse's private bank, but that they're growing at a rate of 16% per year. This will be an easy win.
If Thiam's arrival is good for Asia and wealth management, it's almost certainly bad for the investment bank.
Credit Suisse is aiming for a 70% cost-revenue ratio across its investment bank. In 2014, costs accounted for 85% of revenues across the investment bank and 71% of revenues in the 'core' investment bank. Credit Suisse is already in the middle of a cost-cutting programme which disproportionately targets the investment bank, and under which a further CHF300m of investment banking costs are due to be taken out this year.
Under Thiam things could, however, get much - much - worse. Analysts at Deutsche Bank point out that Credit Suisse could benefit from a 'FICC-exit scenario' in which all but a small 'facilitation revenue stream' is removed from the fixed income sales and trading business. Although this might cut Credit Suisse's overall earnings by up to 21%, they say this would be positive for the bank's leverage ratio and for its return on equity.
Credit Suisse's large US investment banking business looks especially exposed without the support of Brady Dougan. Credit Suisse Securities currently has 2,802 people employed in New York City according to FINRA. That could soon change.
Credit Suisse's investment bankers just got a pay rise. In 2014, average pay per head rose 8%. This sort of thing could stop once a non-investment banker is in charge. Fortunately, a rising share price will be positive for anyone with deferred stock from previous years.
Don't expect Credit Suisse to finalize any strategic hiring plans until the new CEO has settled in. The Swiss bank has been recruiting in M&A and securitized products. Not any more.