Credit Suisse: Whither global private banking?

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Credit Suisse is ditching its global ambitions in wealth management, suggesting that worldwide private banks have had their day.

Credit Suisse’s new chief executive Tidjane Thiam announced plans this month effectively to separate the Swiss bank from the investment bank and the international wealth business. But it looks like the latter could well be split off too.

Global ambitions are also being dumped. The US private bank has been pitched to Wells Fargo, and Western Europe, where Credit Suisse began its retreat three years ago, is no longer on the cards. That leaves emerging Europe, Latin America, Asia and Africa for wealth management, with Thiam emphasizing the focus on Asia.

Tidjane Thiam
Tidjane Thiam

If the bank succeeds in boosting its Asia private banking business, analysts say that could well be IPO’d too, leaving the investment bank as the lower value business, but one that serves the two other wealth management businesses – a three-part bank.

Such a split was perhaps inevitable. Thiam is beating his head against a brick wall trying to make the group function as one, given too many moving parts, with few doing well. But he will need the Asian and Swiss private banking businesses to perform or Credit Suisse may head the way of other global private banks that have retrenched and ultimately collapsed.

For the Swiss business, that is going to take some time. Even though funds from the IPO may go towards domestic acquisitions, it’s not certain there are any good targets right now. Yes, the Swiss private banking industry is in need of consolidation, but the smaller banks that are on the table will not add enough value to Credit Suisse to make it worthwhile.

The larger Swiss banks such as Vontobel that would make a difference to Credit Suisse aren’t for sale. The bank may be better off investing in bringing its digital offering up to par with its competitors UBS and Julius Baer.

In Asia, the bank does stand a chance of gaining ground. Very few players with an international presence dominate market share and a strong focus could see Credit Suisse pull ahead. UBS is a little distracted with its US business, JPMorgan is still quite small in the region, and Citi’s Asia offering is still largely driven by the commercial bank. It will go head-to-head against the regional players such as DBS, so the digital strategy will need to be sharpened, but the Credit Suisse brand is strongest there and in Latin America.

Barclays could not make a global strategy work. HSBC withdrew from most markets. Now that Credit Suisse has confirmed it is out of two markets that were once the key for any private bank with global ambitions, it prompts the question: is the era of the global private bank coming to an end?