Credit Suisse equities business offered new lease of life after job cuts
Every area of Credit Suisse's investment bank is smaller now than it was before, but if you want to find a particularly shrunken area of a once ample business, the equities trading floor is the place to look. As JPMorgan's banking analysts pointed out earlier this month, equities sales and trading revenues at CS were just $15m in the fourth quarter of 2022. In the fourth quarter of 2019, they were....$385m.
That was pre-Archegos, and pre-the closure of Credit Suisse's prime broking business. Prime broking only accounted for circa $600m of Credit Suisse's $2bn or so in historic equities revenues, but as we predicted at the time, its closure in November 2021 has had a disproportionate effect on equities revenues overall. Speaking during the bank's Q4 investor call, Credit Suisse CFO Dixit Joshi blamed the prime exit for the...96% drop in year-on-year cash equities revenues.
It's not, then, that headhunters claim the Credit Suisse equities business is an unhappy place to be. The mood isn't helped by the fact that following the prime broking cuts at the start of the year, numerous equity researchers were let go in December. Credit Suisse isn't commenting, but sources say the cuts appeared to impact up to 25% of the equity research team.
In the circumstances, Credit Suisse's equity researchers could do with some good news. And this is what they got today in the small print of Reuters' article on the coming CS First Boston summit. - The bank is reportedly contemplating winding research into CS First Boston in order to help bankers pitch for IPOs.
If this comes to pass, CS equity researchers could not only have more certain futures, but might even be offered the sort of retention packages CS investment bankers are hoping for. Reuters says the bank is contemplating a model a bit like Deutsche Bank's, whereby equity researchers support ECM bankers within the ECM division. Deutsche Bank's equity researchers are seemingly thriving, not withstanding the IPO drought. "DB have been building up research. It's a recovery story there," says one headhunter.
The only downside of the DB model is that...when Deutsche Bank ported its researchers into ECM, it closed the rest of its equities sales and trading business. There's no indication that Credit Suisse is doing this (unless "align and streamline" is interpreted very liberally), and equities sales and trading is an area which benefits Credit Suisse's wealth management clients. Nonetheless, insiders are said to be twitchy. If researchers are carved out into CS First Boston, salespeople and traders might well wonder what happens next.
Photo by Ýlona María Rybka on Unsplash
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