Feb 9, 2023
Credit Suisse Trading Revenue Collapses as Global Ambitions End
(Bloomberg) -- When Credit Suisse Group AG’s Archegos disaster hit, its traders were in the midst of racking up a $2.65 billion quarter. Less than two years later, they produced a $96 million quarter.
That 96% plunge underscores the end of the Swiss firm’s ambitions as a global investment bank. Ever since the near-simultaneous implosions of Archegos Capital Management and Greensill Capital pushed the lender into chaos, it has sought to reduce risk in the volatile trading business and pivot further to wealth management.
That slide only accelerated last quarter. Fixed-income, a business where peers recorded double-digit gains, slumped 84% from a year earlier in dollar terms. Equities fared even worse, reporting a 96% decline.
Credit Suisse blamed the slump in part on the impact of credit downgrades, which drove clients away from doing business with the firm. Along with the decision to exit the business with hedge funds and allocate less capital, it left the Swiss lender with the worst trading performance of any major investment bank by a wide margin.
“We are concerned about what will be left” of the trading operation that Credit Suisse intends to keep, JPMorgan Chase & Co. analyst Kian Abouhossein wrote in a note to investors.
Credit Suisse, which on Thursday posted its worst annual performance since the financial crisis and warned of another loss this year, has said it wants to align the trading business more closely with wealth management and the Swiss operations to differentiate it from pure wealth managers.
“The markets business will include the strongest and most relevant aspects of the new Credit Suisse’s trading capabilities,” the firm wrote in announcing its new strategy in October.
Traders are also expected to support the advisory business, which Credit Suisse is combining with the boutique of former board member Michael Klein and spinning out under the First Boston name. Advisory and capital markets were the sole bright spot at the investment bank last quarter, reporting a 59% decline in fees. That was roughly in line with the broader industry.
--With assistance from Macarena Muñoz and Nicholas Comfort.
(Adds plans for trading business in final three paragraphs.)
©2023 Bloomberg L.P.