Focus on industry M&A: Credit Suisse mulls business consolidation

Swiss bank Credit Suisse is looking at folding its asset management business into its private banking division, according to reports from Financial Times and Reuters.

The move comes as other major investment banks are targeting cost reduction by re-arranging the setup of their businesses.

As business costs such as reporting and risk management rise due to regulation and the global debt crisis, many financial institutions are seeing sense in consolidating areas of their business to reduce costs.

But increasingly banks are choosing not to sell off their asset management businesses to competitors, despite the high costs and meagre inflows.

One market practitioner explained it is much harder to build up a business from scratch when the markets eventually pick up than it is to keep the existing operations going through the crisis.

This explains why banks are choosing to keep their asset management divisions and reduce costs internally.

One prominent case is Deutsche Bank, which earlier this year decided not to sell its asset management division, and instead merged the unit with its wealth management department.

In its three-year plan released earlier this month, the bank said a newly integrated ‘Asset & Wealth Management’ division was “an essential part of the universal banking model” providing “an efficient platform for future growth”.

This activity points to banks realising the long term value of their asset management businesses as a source of growth in the future.

FT’s report refers to unnamed Credit Suisse officials saying the move would facilitate cutting up to CHF1bn ($1.1bn) in costs by the end of next year.

The article quotes one unnamed CS analysts saying a merger with the private banking division would make strategic sense, since “what the [asset management division] has got left in this business gels well with wealth management.”

Credit Suisse’s assets under management have significantly declined since the onset of the financial crisis, down from nearly CHF600bn to CHF361bn at the end of June.

A spokeswoman at Credit Suisse in New York declined to comment.

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