CEO of Credit Suisse Fights on All Fronts to Recover from a Lost Year.

When Credit Suisse Group AG CEO Ulrich Koerner announced a plan to save the company in October, he said he would start a new bank. Since then, his inability to stop a rush of client funds has made people doubt that "new" means "better."

Credit Suisse lost 111 billion Swiss francs ($120 billion) worth of assets in the last three months of last year, which was the most ever. Most of these assets were left before the big strategy announcement on October 27. Even though the bank tried hard to call tens of thousands of wealthy clients worldwide, it still lost almost 30 billion francs more by the end of 2022.

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Plans for the investment bank that will be run by former Credit Suisse board member Michael Klein are still unclear, and the outflowing tide means that the core wealth management business has a smaller base to make money from. The overhaul that began in October will take three years, but the results from Thursday show how urgent the situation is for Koerner and Chairman Axel Lehmann. It's unlikely for investors to wait that long without seeing results before asking for an even bigger change.

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An analyst at Vontobel bank named Andreas Venditti said, "The bank needs to focus on regaining trust right now and keep going with this plan to reach out to all of their clients." "But if this doesn't work and sales don't go back up, they will have to come up with a plan B."

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Even though there are no signs yet that Credit Suisse is working on a change, different ideas have been floating around for years. The bank has considered selling off parts or all of its Swiss unit and asset management business. It could also make more cuts to its investment bank or even shut down whole divisions.

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When Deutsche Bank AG was in a similarly bad situation a few years ago, it got rid of the whole equities trading unit, which was a big step. It also stopped giving dividends for two years and cut about 7,000 jobs. Most people agree that the restructuring, which officially ended at the start of this year, was a success. However, a lot of its success can be attributed to a global trading boom and, more recently, rising interest rates, which gave it a boost.

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Due to its low stock price, Credit Suisse may again start to get attention from competitors who want to take it over. Trade Algo has said that Zurich's rivals UBS Group AG and Deutsche Bank have both played around with the idea in the past few years.

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Koerner has a lot of work to stop something like this from happening. Even though the bank has a huge outreach campaign and "competitive" prices, he has only been able to convince a few clients to bring their money back. He said on Thursday that many clients are unwilling to do so; some of them are probably gone for good. Analysts and reporters kept asking him how many would come back in the end, but he mostly shrugged his shoulders.

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The loss of client funds has affected Credit Suisse's assets under management, and the company expects income from lending and fee to decline. This means it will have a "substantial" loss before taxes this year. Koerner kept his promise that the bank would be profitable by 2024, but on Thursday, he focused on putting the plan into action and the "long-term attractiveness" of the bank for its shareholders. Last year was called the "transition year" to a more profitable Credit Suisse, and this is now being said about 2023.

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Sliding creditworthiness could make the situation worse, and ratings firm Moody's said that the outflows "add to the difficulties" of Credit Suisse's plan to turn things around. The bank has said that the rating downgrades that have already happened since the announcement of the revamp have made it more expensive to raise money made it harder to sell its products, and made it harder to keep clients.

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Meanwhile, Koerner's decision to cut by half a bonus pool that was already small is likely to make the staff frustrated, and that will make it even harder for the company to stop the loss of employees it has been experiencing for a while, even though it has taken steps like creating a "transformation award" to deal with the problem. Credit Suisse's new strategy will take some time to work, and there are still risks in putting it into action, which is made worse by tough markets. There are still some unknowns, such as how much money will be made from selling assets and how CS First Boston's investment banking business will be set up. There are still legal issues and regulatory scrutiny in the wake of Archegos, Greensill, tax-evasion probes, and old residential mortgage-backed securities cases.  

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On the bright side, Credit Suisse has issued shares and debt to raise money and try to ease some of the capital and liquidity worries that were at their worst last fall. The sale of shares was very dilutive and priced very low, while the bonds had to be sold at interest rates similar to what junk-level issuers paid.

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Credit Suisse also made progress in cutting costs. In the last quarter, it got rid of 2,000 jobs, putting it on track to get rid of 9,000 jobs by 2025. It also said that the vast majority of the cost cuts it wants to make this year have already been started.

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Work is still being done on the key plan to separate the risky investment bank into the new Credit Suisse First Boston brand, but this unit's size, cost base, and revenue outlook are still unknown. Even though the bank hasn't yet found the "anchor investor" it wants for that unit, putting Klein in charge of it could make it easier to find one.

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And managers say there are signs that clients' money has started to come back since the start of the year. S&P Global analyst Anna Lozmann said that "management actions are reducing market uncertainty," which is crucial for the business to turn around in the long run.

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The last three months had shown that even if Koerner and Lehmann do everything they said they would, it's unlikely that Credit Suisse will be back on track by the time Koerner and Lehmann said it would.

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Kian Abouhossein, head of European bank equity research at JPMorgan Chase & Co. in London, said, "Management is doing everything they said they would do." "The problem is that the brand is falling apart faster than expected, both in wealth management and investment bank."

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