Credit Suisse CEO expects wealth management slowdown

September 22, 2020.

CEO Thomas Gottstein said Tuesday that he expects the firm’s wealth management business to slow down in the third quarter and bank consolidation to continue in Europe as the economy seeks to recover from COVID-19.

Speaking at a virtual conference hosted by Bank of America, Gottstein said the third quarter is typically seasonably slower than the second quarter, so the wealth management slowdown is to be expected.

He said, though, that trading activity is generally holding up well both compared to the previous quarter and the same period a year ago.

“Clearly we have some headwinds on the U.S. dollar rates … but overall we are quite satisfied,” Gottstein said.

The CEO said negative interest rates will continue to put pressure on net interest margins for all financial institutions in the eurozone and other European countries, which, combined with the high volume of banks on the continent, will likely lead to consolidation.

Between 2000 and 2018, Gottstein said, Switzerland went from approximately 360 banks to 248.

He added, though, that mergers, especially across borders, have become more complicated because of regulatory approvals and the general adversity against “too big to fail” banks.

“So while I think directionally, yes, I expect more consolidation both in-market and cross-border, they’re also somewhat complicated,” Gottstein said. “And let’s see how things develop.”

Credit Suisse is currently rumored to be the target of a potential merger with rival Swiss bank UBS, with an agreement possibly struck by early next year.

The bank is also looking to grow outside of Switzerland. Gottstein said in the Asia-Pacific region, Credit Suisse has been very happy with the performance this year despite the coronavirus and tensions between China and the United States. He added that the firm is “very well balanced” between China, Southeast Asia and other parts of Asia, making Credit Suisse less reliant on China performance directly.

“Having said that, China is strategically very important,” Gottstein said.

Earlier this year, Credit Suisse acquired a majority stake in China-based Credit Suisse , raising its ownership from 33.3% to 51% through capital injection. Gottstein said the Swiss bank eventually plans to take 100% control of the Chinese securities venture.

Gottstein also said that Credit Suisse plans to double its workforce in China. Last month, the Swiss bank said the increase in the number of Chinese employees comes as the bank targets a 100% increase in revenue in the country.

“Clearly, we see significant long-term opportunities,” Gottstein said.

In the short term, Gottstein said Credit Suisse is concerned about sanctions against China and other U.S.-China related tensions, but the firm intends to be tactical and opportunistic about implementing its Chinese plans.

Credit Suisse is preparing to end a quarter that saw a fair amount of reshuffling, including the consolidation of its risk and compliance functions, the merger of investment banking units and the reconfiguration of its operations in Switzerland. 

Gottstein said he’s happy about where Credit Suisse’s Swiss business now stands. He added that the bank is ready to continue investing in digital banking services as demand ramps up, including a new type of digital, teller-less branch that will launch next month.

This is “how we see the future of branches in Switzerland,” he said. “And I’m very excited about this because I think for the first time in a long time, we have quite a significant growth opportunity for our retail business.”

Gottstein said the changes and cost-cutting measures that Credit Suisse is implementing are being done to help fund growth.

“This is really as much about growth as it is about cost,” he said. “And we want to invest in growth, be it in Asia and particularly in China.”