TheEconomistAugust 24th 2019 571T
idjane thiamis not the first non-Swiss
chief executive of Credit Suisse. His
American predecessor, Brady Dougan, held
the job for eight years. But Mr Dougan was
an insider, having been at the firm for ages.
Mr Thiam was anything but. A citizen of
France and Ivory Coast, where he was a gov-
ernment minister in the late 1990s, he had
been a consultant at McKinsey and had
overseen the European arm of Aviva and
the whole of Prudential, two British insur-
ers. Before taking the top job at Credit
Suisse in 2015, he had never even worked
for a bank. Charming in person and intimi-
dating and forceful by reputation, Mr
Thiam walked straight into a tempest.
From the start he knew that Credit
Suisse’s defences against disaster were un-
comfortably thin. Its common equity tier 1
capital covered just 10.3% of risk-weighted
assets (rwas), less than at any of its peers.
To bolster them Mr Thiam quickly raised
SFr6bn ($6.3bn) in equity. Unleashing his
inner consultant, he set about reorganis-
ing the bank’s structure, steering it towards
wealth management and away from the
riskier whirlpools of investment banking.
Mr Thiam promised deep cost cuts from
the start, when, he now says, “there is the
greatest willingness to change and no ‘re-
structuring fatigue’ ”.
But within months a nightmare had un-
folded. In the last quarter of 2015 Credit
Suisse made a stonking net loss of
SFr6.4bn, as it wrote down the value of its
investment bank and was buffeted by trad-
ing losses. More cash glugged away when
the bank settled American charges that it
had mis-sold residential mortgage-backed
securities a decade before. Another share
sale, raising SFr4bn, ensued in 2017. With a
mild whiff of desperation, Mr Thiam even
proposed floating Credit Suisse’s sturdy
domestic bank, an idea he later ditched.
The firm’s shares—and presumably Mr
Thiam—still bear the imprint of those
rights issues and write-downs. Their price
is half what it was when Mr Thiam took
over, and about 70% of tangible book value.
The bank is still not free of legal and ethical
shadows: it is being sued over loans in Mo-
zambique before his time (see Middle East
and Africa section).
Nevertheless, Mr Thiam has survivedand now argues the worst is over. The re-
structuring programme was completed
last year. The “strategic resolution unit”
(sru) housing dud assets, which once held
a quarter of rwas, has been closed. In the
latest quarter the firm’s return on tangible
equity (rote) climbed to 9.7%, roughly
what investors regard as par for banks.
Many European banks struggle to do as
well (although Credit Suisse’s bigger neigh-
bour, ubs, which shifted its weight from
investment banking to wealth manage-
ment a few years earlier, rang up 11.9%). The
question now is whether the restyled Cred-
it Suisse can progress from mere stability
towards higher profitability and growth.L’ingénieur
Mr Thiam may have studied engineering in
Paris, but instead of elegant simplicity he
opted for an unusual, complex and asym-
metrical structure for the firm, based
around five divisions. One houses a Swiss
universal bank. Another contains all the
Asian businesses. Three functional divi-
sions cover the rest of the world—wealth
management, investment banking and
global markets (trading).
In total, markets-related activities ac-
counted for half of rwas in 2015. Now their
share is just one-third. Reckoning that
banks’ sales and trading revenues would
stagnate, thanks to overcapacity and tech-
nological advance, Mr Thiam chose “not to
be all things to all people and to have very
low costs”. Growth would come instead
from managing the assets of rich people—Credit Suisse
L’étranger
Four years after Tidjane Thiam joined Switzerland’s second-biggest bank, his
agonising overhaul is at last paying off
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