Banks

Tidjane Thiam flags acquisition with Credit Suisse

David Levenson | Bloomberg | Getty Images

Credit Suisse's new chief executive has sounded out its main investors about plans to expand the Swiss bank's asset management operations, potentially through an acquisition, according to people familiar with the talks.

Tidjane Thiam, who took over at Switzerland's second-biggest bank on July 1, has met many of its top 20 investors in the past few weeks and discussed bulking up the asset management business while also signalling that acquisitions are a possibility.

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As the bank prepares to unveil quarterly results on Thursday, the news that Mr Thiam is already eyeing potential takeovers will revive memories of his abortive bid for AIG's Asian unit only months after becoming CEO of UK insurer Prudential in 2009.

Most analysts expect Mr Thiam to slash underperforming parts of Credit Suisse's investment bank and expand its private banking operation, particularly in Asia. But he has signalled to investors that he sees most potential to expand in asset management, which is less capital intensive than investment banking and has strong cross-selling potential with Credit Suisse's private bank.

One possibility is for Credit Suisse to use a potential acquisition as a reason for raising capital from shareholders, which could also help to strengthen its capital levels, according to a person familiar with the situation. Mr Thiam is expected to unveil his strategy in November, investors said. The bank declined to comment.

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He has told some investors that the bank is being held back by relatively weak capital levels compared with rivals. In recent weeks parts of its investment bank's fixed income operations have been forced to stop trading after hitting capital limits. The bank faces a choice between investing more capital in parts of its investment bank or pulling out of them completely.

"We talked generally about M&A, but he didn't mention specific targets," said David Herro, chief investment officer of Harris Associates, a Chicago-based fund manager that is a top five shareholder in Credit Suisse. "Price is important. He can't just pay anything. But I'm not concerned that he is an empire builder."

A top 20 investor said: "In asset management, he has a ragbag of businesses . . . That is definitely an area that he wants to build up. I think it will be more gradual than anything big, but that's definitely on the agenda."

Credit Suisse sold its traditional fund management business with its SFr75bn of assets to Aberdeen Asset Management to raise capital after the financial crisis in 2008.

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Its remaining asset management division had SFr392bn under management at the end of March, substantially less than its bigger Swiss rival UBS with SFr661bn. However, Credit Suisse's operations in this area are more profitable than those of its main rival and it generated SFr549m of pre-tax profit last year, against SFr467m at UBS.

Mr Herro at Harris Associates told the Financial Times he wanted Mr Thiam to explore all options for boosting capital internally, such as shedding assets in the investment bank, before asking shareholders for more money. "Raising capital isn't an exercise that should be taken lightly," Mr Herro said, adding: "His track record shows proven leadership and I think he will be great."

The bank had a common equity tier one ratio — a measure of balance sheet strength — of 10 per cent at the end of March — lower than many rivals. Its leverage ratio, measuring equity to total assets, was below the regulatory minimum at 3.9 per cent and the Swiss authorities are expected to raise the bar further later this year.

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