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Credit Suisse takes axe to prime broking after multibillion-dollar losses

Credit Suisse plans to all but exit the prime brokerage business that left the Swiss bank with $5.1bn of losses earlier this year, as new chair António Horta-Osório unveiled a restructuring of the troubled lender.

In a new strategy outlined on Thursday, Credit Suisse will consolidate its wealth management division and streamline its investment bank, including mostly exiting its prime services unit that serves hedge funds.

That unit was at the heart of the losses the bank incurred after the collapse of family office Archegos Capital.

Horta-Osório, who joined as chair in April, has spent the past six months planning a revamp of a bank beset by crises in recent years.

The overhaul of the bank’s structure builds on changes made by chief executive Thomas Gottstein last summer, when he consolidated the investment bank and combined risk and compliance oversight, rolling back some of the initiatives introduced by his predecessor Tidjane Thiam.

“Risk management will be at the core of our actions, helping to foster a culture that reinforces the importance of accountability and responsibility,” Horta-Osario said in a statement on Thursday.

The revamp came alongside the bank’s third-quarter results, which showed a 26 per cent rise in pre-tax profits from a year earlier thanks to strong performance in its wealth management business and a record third quarter for its domestic Swiss bank.

The SFr1bn of pre-tax profits for the quarter comfortably beat analysts’ forecasts. Revenues at its wealth business were up 3 per cent from a year earlier, while its investment bank revenues rose 10 per cent. The bank also released SFr144m of provisions for credit losses.

“Wealth management businesses returned to robust net new assets and higher transaction revenues sequentially, while recurring commissions and fees and client business volumes demonstrated strong year-on-year momentum,” Gottstein said.

The bank’s common equity tier 1 ratio — a benchmark of financial strength — rose to 14.4 per cent, comfortably above its 10.7 per cent minimum requirement.

Since joining, Horta-Osório’s focus has been on attempting to draw a line under past controversies that have dogged the bank. These efforts culminated in the settlements with regulators in three countries last month over the Mozambique tuna bonds scandal, as well as Finma, the Swiss watchdog, concluding its year-long investigation into corporate espionage.

Credit Suisse on Thursday also revealed it had taken SFr564m of litigation costs relating to a range of historic matters, including potential lawsuits from investors who lost money from investing in the bank’s supply chain funds linked to Greensill Capital.

Last month the bank agreed to pay $475m in fines and forgive $200m of debt owed by Mozambique in a series of co-ordinated settlements with four regulators in three countries over its role in the long-running “tuna bonds” scandal.

Credit Suisse had previously disclosed it would take a $230m charge in the third quarter in relation to the settlements. The bank also reported a further SFr113m impairment charge from its investment in hedge fund York Capital.

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