ZURICH/LONDON (Reuters) - When Tidjane Thiam unveils his plans for Credit Suisse on Wednesday the Swiss bank’s new chief executive will likely rest his case on three Cs: capital, cuts and charm.
Thiam will show his hand after taking the reins at Zurich-based Credit Suisse in July from British insurer Prudential. Investors expect him to refocus the bank’s business toward wealth management and asset management, while shrinking its investment bank and closing the capital gap on rivals.
Expectations remain high for Thiam after news of his appointment in March sent the bank’s shares soaring almost 8 percent.
“Big ships are hard to turn,” said one top 20 investor in Credit Suisse, Switzerland’s second-biggest bank behind local rival UBS.
“But… he knows how financial markets work. I think he will announce some sales, a little-bigger-than-expected capital increase... and an improving dividend story.”
Thiam’s predecessor Brady Dougan faced criticism for not following UBS which scaled back its investment bank, an industry in flux since the financial crisis, and focused on more stable wealth management. Credit Suisse’s capital position has also been a persistent concern for investors.
Credit Suisse declined to comment ahead of the Oct. 21 strategy update when the bank will also present its third-quarter results.
Near the top of Thiam’s agenda at presentations in London will probably be a move to tap the market for cash.
The consensus is for the bank to seek at least 5 billion Swiss francs ($5.2 billion). However, Thiam may hold off on giving an exact figure before Switzerland outlines tougher capital rules due by the end of the year.
Zuercher Kantonalbank analyst Andreas Brun said a new requirement in line with the 5 percent leverage ratio target cited in an unconfirmed report would leave Credit Suisse with a 5 billion franc shortfall in core capital based on his full-year estimates.
“RABBIT OUT OF THE HAT”
Along with a cash call to investors, Thiam is expected to signal more explicitly that private banking and wealth management will be a central priority.
Credit Suisse is the world’s fourth-biggest private bank by assets after UBS, Morgan Stanley and Bank of America Merrill Lynch. A renewed push in high-growth Asia, where Credit Suisse is the third-largest player, would be key.
Investors expect Thiam to trim the investment bank to which Credit Suisse allocates around 60 percent of its leverage capital, according to Morgan Stanley analysts.
Shedding or shrinking cash-intensive units like its macro products, prime brokerage and fixed-income businesses would help Thiam free up much-needed capital.
Credit Suisse could also cut up to 2 billion francs in costs, sell its U.S. private bank and shake up parts of its top management, the Schweiz am Sonntag paper has reported.
Kepler Cheuvreux analyst Dirk Becker cautioned this more incremental approach could be a letdown to investors who had hoped for a dramatic revamp, which might have included a purchase of Swiss private bank Julius Baer.
“A bit of cost cutting, a bit of downsizing of investment banking, a bit of reorganisation and, in order to pay for it, raise capital -- that would be very disappointing unless he pulls a rabbit out of the hat,” said Becker, who has a “reduce” rating on the stock and a 22.50 franc target price.
To avoid any disappointment Thiam will lean on the same charm that has won over the Swiss media -- long-time critics of his predecessor Dougan -- and pleased investors.
Editing by Keith Weir