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Credit Suisse Struggles to Keep Clients as Overhaul Continues

Credit Suisse Group AG won a $54bn lifeline on Thursday 16 March, giving it the chance to rebuild its business. However, some clients, including several ultra-wealthy clients in Asia, continue to cut back on their exposure amid the turmoil this week.

In the Middle East, some customers have asked the bank to convert cash deposits into treasury bills and bonds. And in Germany, a wealth manager received inquiries from Credit Suisse clients looking to shift deposits to his firm.

Attrition of this kind will make the overhaul that CEO Ulrich Koerner and his team are overseeing that much harder.

Stemming the months-long exit of clients is critical to righting the battered Swiss bank, which saw net outflows hit $119bn in the fourth quarter.

This blog will look at the steps Credit Suisse is taking to address the situation and the possible future scenarios.

Client pullbacks continue

The client pullbacks risk furthering a trend that stretches back several months. In November, the bank announced that around $84bn had drained from units, including the core wealth management business in the first few weeks of the quarter after a social media firestorm about the bank’s financial health spooked clients.

The concern is that further outflows could permanently hinder a wealth unit that already slipped to a pretax loss last year.

Outflows haven’t reversed as of this month, though they have stabilized at much lower levels, according to the bank’s annual report released Tuesday, the same day Koerner said on Bloomberg Television that the bank had seen inflows on Monday.

A day later, his bank’s shares plunged after its biggest shareholder ruled out adding to its stake, unnerving investors already on edge after three regional US banks failed in a span of days.

Banker calls

Bankers are calling round clients to reassure them, primed with talking points sent out by executives or communicated at town halls. The lender is offering deposit rates that are significantly higher than rivals to win back funds, Bloomberg reported earlier this month.

“In our conversations with clients over recent weeks, we have been experiencing strong support for the bank and our employees,” the bank said in a statement. “We are fully focused on providing our clients with advice and solutions.”

But some ultra-wealthy families booking out of Asia accelerated their retreat from the Swiss bank this week, according to three large single-family offices that collectively manage billions and multiple private bankers based across Hong Kong and Singapore.

One family office in the region is planning to cut back as much as 30% of its money parked with the embattled bank after the wealth manager was unable to assure it that non-Swiss clients would be protected in the event of a collapse, one of the people said.

Possible scenarios

Analysts have started to sketch out dramatic alternatives to the company’s restructuring. JPMorgan. analyst Kian Abouhossein wrote in a note that the “status quo is no longer an option,” laying out three possible scenarios for Credit Suisse and saying that a takeover — with rival UBS Group AG a probable suitor — is the most likely. Both lenders are opposed to a forced combination, Bloomberg reported Thursday.

Any such move could be followed by a listing or spinoff of the Swiss unit. Other possibilities mooted in the note included the Swiss National Bank stepping in with a full deposit guarantee or Credit Suisse’s entire investment bank being shuttered.

Executives insist such drastic solutions — and condensed timeframes — aren’t needed now. The bank has consistently said it has sufficient liquidity, a position the backstop only strengthens. It isn’t yet clear what the overall flows are or whether the backstop is helping attract clients back.

That means some analysts have started to sketch out dramatic alternatives to the company’s restructuring.

JPMorgan. analyst Kian Abouhossein wrote in a note that the “status quo is no longer an option,” laying out three possible scenarios for Credit Suisse and saying that a takeover — with rival UBS Group AG a probable suitor — is the most likely. Both lenders are opposed to a forced combination, Bloomberg reported Thursday.

Any such move could be followed by a listing or spinoff of the Swiss unit. Other possibilities mooted in the note included the Swiss National Bank stepping in with a full deposit guarantee or Credit Suisse’s entire investment bank being shuttered.

Executives insist such drastic solutions — and condensed timeframes — aren’t needed now the backstop is in place. The strategic revamp announced in October remains the core plan to turn around the bank, they say, with the bank’s offer to buy back debt underlining its core strength.

“These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation,” Koerner said in a statement Thursday. “My team and I are resolved to move forward rapidly to deliver a simpler and more focused bank built around client needs.”

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