When Credit Suisse Chief Executive Tidjane Thiam took the reins in 2015, most people weren’t sure exactly what the Swiss bank was getting in its new leader. A former consultant, insurance executive and government minister, Thiam didn’t have any direct banking experience previous to joining the firm. In fact, several of Credit Suisse board members didn’t recognize his name when it first began circulating as a potential option.
A year into his tenure, investors and analysts gave Thiam and former Deutsche Bank CEO John Cryan failing grades for their initial attempts at overhauling the two banks. The since-ousted Cryan was actually viewed more favorably. And while Thiam proved to be adept at cost-cutting during his first three years on the job, Credit Suisse booked annual losses from 2015 through 2017 before turning a profit last year. But now, after Credit Suisse surprised the market with an impressive second quarter performance, including being the only investment bank to report improved trading revenue, Thiam seems to have quieted most of his former critics.
“If you had asked me a year and a half ago, I would have been negative on Credit Suisse and said [Thiam] was a dead man walking,” Octavio Marenzi, CEO of consulting firm Opimas, told the Wall Street Journal. “He has pulled a rabbit out of the hat. He has been able to manage costs in a very disciplined way without sacrificing revenues too much.”
While improved grades for Thiam are certainly welcomed by Credit Suisse, its bankers and traders have surely noticed that his staple skill – cost management – is still being implemented. Total compensation costs for the first half of 2019 were down 8% year-on-year in investment banking and capital markets and up 5% in global markets, which is exactly in line with increased headcount. We’ll have to wait and see how many strong quarters it will take for Thiam to truly loosen the purse strings.
Elsewhere, artificial intelligence has quickly become one of the biggest buzz phrases uttered by bank chiefs. AI is being looked at as a promising technology for anything from trading to investment banking. It’s also helping banks lure in customers with more prescriptive semantics. J.P. Morgan just signed a deal with software company Persado to improve marketing messages, direct-response emails and online display ads using AI.
In one test, human copywriters pitched potential borrowers with the line: “Access cash from the equity in your home,” followed by the call to action: “Take a look,” according to the Wall Street Journal. Persado’s algorithms came up with: “It’s true—You can unlock cash from the equity in your home” and suggested: “Click to apply.” Persado’s version led to nearly double the number of applications as JPM’s. It appears that no banking job is safe from the machines.
BNP Paribas has poached a senior mergers and acquisitions banker from Nomura to run its M&A business in the U.K. Andrew McNaught, co-head of M&A in Europe, the Middle East and Africa at Nomura, will join BNP in August. The French bank is looking to aggressively build out its M&A team in London. (Financial News)
The Carlyle Group is the latest private equity firm to ditch its partnership structure and become a corporation in a bid to improve its stock price. Other PE firms including rival KKR have already abandoned the partnership model in an effort to open up shares to more private investors. (FT)
Pre-tax profits at Man Group increased 22% during the first half of the year, due mainly to the strong performances of the firm’s quant investment teams. (Financial News)
Regulators have fined a former Morgan Stanley broker for trying to settle a client’s claims by personally writing $28k in checks without the bank’s knowledge. (Advisor Hub)
The stock market plunged late Wednesday after the Federal Reserve announced its first interest rate cut in a decade. The issue investors are having is that the adjustment was small, and that Fed Chairman Jerome Powell suggested further rate cuts are unlikely to be coming anytime soon. (NY Post)
The huge hack at Capital One may encourage big banks to divert even more resources to cybersecurity. Currently, banks spend an average of $2,300 per employee annually on cyber-defense. (CNBC)
Hedge funds are off to their best start in a decade. (FT)
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