Swiss giant Credit Suisse stepped out of the industry’s traditional talent pool in March when it hired Tidjane Thiam as chief executive.
Ivory Coast‒born and French-educated, Thiam spent the past six years at the helm of UK insurance company Prudential. He was previously Prudential’s CFO.
“That he went to very selective schools in France, and was capable of rising through the ranks at Aviva and to the top spot at Prudential, two very British insurers, all seems to suggest that he has what it takes to overcome whatever obstacles,” says Andreas Venditti, a senior analyst at Bank Vontobel in Zurich.“Bringing in an outsider might also help quell the long-standing rivalry at Credit Suisse between its private and investment banking arms, with many private bankers feeling that the latter has always had the upper hand—in particular, under the tenure of outgoing CEO Brady Dougan.”
At the same time, says Venditti, there is the question of acceptance, of how well investment banking heavyweights in London and New York will take to Thiam. Since Thiam won’t take over until the end of June, Credit Suisse remains guarded about how things might change. This is reasonable, says Venditti, but could be risky. “Rumors about possible strategic shifts, especially additional and more significant cuts in investment banking, will continue to swirl,” he says. “Some people might consider moving elsewhere, and it is usually the good people to go first.” Thiam enters the fray at a tough time for the banking industry, with increasingly stricter regulations and low-to-negative interest rates pretty much everywhere. Credit Suisse, in particular, has a mixed record: it got into trouble with US authorities for helping clients evade taxes and has so far avoided reappraising its investment banking business, unlike its peers; it must also address questions regarding its capital levels.
“Dougan has always insisted the bank was well capitalized, but if you look at the numbers, in terms of core capital they are only average at best,” says Venditti. “Because he [Dougan] claimed there was no issue, he didn’t leave himself any space for a capital increase—it would have been difficult for him to explain why—whereas a new guy might be able to look at things in a fresh way.”
Observers expect Thiam to make a push toward Asia, something he did successfully at Prudential. However, Credit Suisse’s capital constraints may be an impediment. “You might be able to justify a capital increase with an expansion in Asia, and I think the market could potentially look at it in a favorable light,” says Venditti. “But you have to find suitable targets at the right price, and I’m not sure how easy that is.”