CREDIT Suisse Group AG’s appointment of Tidjane Thiam as chief executive officer boosted shareholder expectations that the firm will shift away from investment banking toward its more profitable money management businesses.
Credit Suisse shares gained 7% on the appointment. Thiam joins from Prudential Plc, whose stock has more than tripled during his tenure as CEO.
Thiam will become the first black chief executive officer of a European bank, and the Ivory Coast-born executive will also be the only black CEO running one of Switzerland’s biggest publicly traded companies.
Brady Dougan, the investment banker who has led Switzerland’s second-biggest lender since 2007, has contended with pressure to reduce the focus on the securities unit as rules that demand higher capital hurt returns and weakened the company’s buffers.
The switch to Thiam, who has spent the past decade running insurance businesses, is a signal that the firm may follow competitors including UBS Group AG in making deeper cuts to the investment bank.
“Dougan, the dyed-in-the-wool investment banker, is being replaced by an expert on wealth and asset management and insurance,” Andreas Brun, an analyst at Zuercher Kantonalbank. “This could also give rise to a paradigm shift.”
Credit Suisse shares gained 7% at 12:30 p.m. in Zurich trading after Credit Suisse said Tuesday that Dougan will step down at the end of June. Thiam, a dual citizen of France and Cote d’Ivoire, joins from Prudential Plc, Britain’s largest insurer by market value, whose stock has more than tripled during his tenure as CEO.
Capital remains the key issue at Credit Suisse. The bank holds less capital relative to risk-weighted assets than its peers, data compiled by Bloomberg Intelligence show. Dougan has been trying to rebuild capital ratios, which were battered last year by US fines for helping American clients evade taxes. The bank showed a common equity ratio of 10.1% at the end of December after restating earnings because of higher provisions for mortgage-related litigation.
Cutting back the investment bank more should boost the firm’s profitability as measured by its return on equity, Goldman Sachs Group Inc. analysts wrote in a note to clients. Thiam’s experience in Asia, an important growth market for Credit Suisse’s wealth management business, may also lead the firm to expand in the region, analysts at Berenberg said in a note.