On Thursday, Credit Suisse unveiled a strategic reorganization and reported a quarterly loss that was significantly worse than analyst expectations. Under pressure from investors, the bank disclosed a significant restructuring of its operations in an effort to address underperformance in its investment bank and in response to a slew of litigation costs that have severely hurt profitability.
To sell the majority of its securitized products group business, Credit Suisse Group AG has entered into an exclusivity agreement with a group of investors led by Apollo Global Management Inc.
According to a release from the Swiss lender on Thursday, if the deal goes through, the group, which also includes Pacific Investment Management Co., will purchase “the majority of SPG’s assets from Credit Suisse and other relevant financing operations from Credit Suisse.”
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In order to retain a seamless, high-touch client experience, the buyers would also “manage the residual assets on Credit Suisse’s behalf, hire the SPG team to the new platform, and receive some ongoing services from Credit Suisse,” it said.
The disclosure is a part of a comprehensive revamp of the investment banking branch that Credit Suisse unveiled on Thursday. The reform also involves splitting the capital markets and consulting services into a new business that will try to draw in outside investors, as well as a capital raise funded by Saudi National Bank.
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The securitized products department buys and sells securities backed by pools of mortgages and other assets, such as auto loans or credit card debt. The group has been run by New York-based trader Jay Kim since 2016. Additionally, the business offers financing to customers who wish to purchase these goods, and on their behalf, it will “securitize” loans by cutting them up into new securities with varied risks and return and selling them to investors for a fee.
Michael Klein is anticipated to take over as First Boston’s new CEO following Credit Suisse Group AG’s radical restructuring of its investment bank, the company announced.
After suffering numerous losses, the Zurich-based bank is restructuring its struggling investment bank, forming a new capital market and advisory bank under the original First Boston name as part of the process. According to the lender, David Miller, who is now in charge of global investment banking, will stay in that position to help with the creation of the new organization.
Additionally, the bank appointed Mike J. Ebert and Ken Pang to jointly lead the markets business beginning on November 1. The capital release unit’s leader has been announced as Louise Kitchen.
(with inputs from agencies)