CNBC Europe, March 10, 2015
Following are excerpts from the unofficial transcript of a CNBC interview with Prudential CEO, Tidjane Thiam, on his upcoming move to Credit Suisse.
Interviewed by Steve Sedgwick and Geoff Cutmore of CNBC.
All references must be sourced to CNBC.
Steve Sedgwick/Geoff Cutmore (SS/GC): Why is this the right move for you?
Tidjane Thiam (TT): First of all there's timing. As I've said this morning, I was always going to leave [Prudential] some day. I wasn't going to be CEO for life at Prudential. So it's always a question of when. When you think about it as CEO, it's always the most difficult call. And by definition you want to leave when everything is going well. It's not when business is slowing down or having any issue. That really allows you to leave without the market worrying that you're running away from something. So that was really important. We've closed this year well. Q4 was very strong. I'll still be around presenting Q1. Hopefully people will see that there's nothing wrong there. You need to leave with a clear conscience and people thinking that you're not running away from anything.
SS/GC: Just on the numbers that Prudential's running at the moment, 14 percent profit increase for 2014 - I think you can be pretty happy with most of the metrics. Is there a sense though that this is as good as it gets? We've seen the reaction in the share price this morning. Do you think the markets might be very suspicious that you've chosen this moment to leave because there isn't much left on the table for the next fellow or woman that follows you?
TT: I understand the question, but I think – 3 percent I take as a polite goodbye from the market. A way to present a bit of appreciation. Seriously if you've done a good job as a CEO you have to take a company, you have to leave it in a better condition than you found it. I think I've been able to do that and you have to leave it with no clouds. And there's a bit of I think wobble, around succession. I'm very confident that we have very good succession in place. It's a kind of formality but it hasn't been announced. I think the Chairman has made an announcement this morning. It will be announced shortly … we will reassure the market…
SS/GC: Let me go back to ancient history, 2009/2010. Geoff said about leaving a bit on the table for the next man, you saw once in a decade opportunity to buy AI… you were not allowed to buy it. Shareholders apparently knew better than you at the time. You've proved them wrong… you've said there's an opportunity here, over a very long period, to grow the franchise in Asia, to grow emerging markets. Do you feel there's a lot there for the next person, whether it's Mike or someone else?
TT: Plenty.. I get sometimes unflattering headlines when I talk about it. You all find me too enthusiastic… 30 times bigger… let's take the number. Do you know how many customers we have in China? You know we say China is our fourth biggest business…we have 700000 customers in China. We have 7 million in UK. Can our business in China be 30 times bigger which is 21 million? If we have 7 million out of 60 million Britons, can we have 21 million out of 1.3 billion Chinese customers? I mean the maths aren't too challenging. The difficulty, I've said this again and again, the human brain works linearly and nature and the world works exponentially. The way an acorn becomes an oak is exponential. Nothing in nature works linearly. But our brain is trained to work linearly and when you're driving something that is exponential, there is always a big gap between expectations, which are linear projections… it always goes like that… you are going like that. And people go, that's not possible. But actually, in nature, that's how most things develop. So we're on an exponential in Asia. That's why 14 percent is sustainable. We've been doubling every five years and that can go on and on and on…
SS/GC: We as journalists look for catalysts. One of the big changes we see at the moment is the big pension revolution we see in the UK at the moment, which obviously undermines the reason for being… for the annuity industry. For the life pension segment. Again, I'll put it to you, perhaps… was this a catalyst for you as you thought, ok, game's up here? People are not going to be buying product annuity in such large numbers in the UK, maybe this is a time where this industry is going to go into a slower growth period?
TT: Not really. I know it's maybe really hard to believe. I actually believe it's really important. I believe in renewal. The problem is if you stay too long in a place, even the sound of your voice becomes annoying to people. And I've always said I never want to get to a point when you start talking and people go… oh there he goes again. Every politician who's stayed too long run into that. Every CEO who's stayed too long have run into that. It's human nature. I think it's a very natural cycle of five, six, seven years if you have done well, you have to have the courage to move on. The UK is fine, profits are up 7 percent, savings products are up 27 percent. What we have done is transfer a bit of risk to the customer, but as a result, we actually incentivise them to save more? And we're selling them, we've put a with profit product with ISA. It's doing extremely well. Early sales are very strong. Proving that all that is working well. Actually if there was a part of the group not doing well, it would make it close to impossible for me to leave. The last thing was solvency 2. I couldn't leave the group if there was a capital raise or a big discontinuity coming because, six months later, that would happen and destroy my reputation. So we have actually resolved solvency 2 now, largely. And that is going to be manageable. Or in a way my signal that I can actually move on.
SS/GC: You've explained why you don't want to be at the Pru too long… and people getting bored of the sound of your voice. I'm not entirely sure of that but let's move on. Why Credit Suisse and why are you becoming a banker?
TT: It's a bit tricky for me because I'm here as CEO of Prudential. I don't want to say too much about Credit Suisse, I think that would be inappropriate. We have a press conference this afternoon. I think it's… I don't know. A high level answer is that it's a great brand. It's one of the great brands in banking. I've always been more on the asset side, than on the lending side. My career in insurance is about collecting wealth and making it grow. And that fundamentally is very much the business that Credit Suisse is in. I think there are huge opportunities if you look at how the demography is moving around the world, wealth creation… huge opportunities there to do more… whether it's in Asia or other emerging markets.
SS/GC: You mentioned wealth twice but you haven't mentioned investment banking… have you given us a clue there? And I know that you're still a Pru man… for the short term. But have you given us a clue now where Credit Suisse is going… it's about wealth, it's not about investment banking?
TT: For the time being, I haven't even left PRU. I'm still at PRU for quite a while. It would be completely imprudent for me to comment on the strategy of Credit Suisse. I really have a lot of respect for Brady Dougan. I want to say this on record. We have an experience together. We worked on a deal together when I was in the boardroom presenting to the AIG board. He was sitting to my right. So we know each other. I respect him. He's done a good job at Credit Suisse and I'm pleased to come in after him.
SS/GC: Clearly the board feels that you're the right man to come in and bring something new to Credit Suisse at this point. Let me ask you – what does the board think is broken at Credit Suisse?
TT: I'm sorry. Again, I'm going to be a bit evasive. It's too early for me to talk about those questions. I think the strategy is globally sound. And I think that in due course, I'm not gonna. Let me start, and ask me again… you know, I always answer your questions. Once I'm in the room… once I'm in the room.
SS/GC: Let me ask you something very factual. At what point did the conversation start with the board of Credit Suisse through the head hunters, when did they start the initiative to say, would you be interested in coming and having a conversation? This gives us a sense of how long this process has been going on. It's a very fast change, for CEOs of two major organisations. Doing this in June is very quick. One assumes this conversation has been going on for a while.
TT: I will leave the assumptions to you. These are very delicate matters that involve a lot of people. Will make a lot of people uncomfortable. I hate not answering, but I think it would inappropriate to be too specific.
SS/GC: Let's talk about business models, if I may… I want to talk about moving from insurance model, to universal banking model, to what you might offer as well. something Geoff raised when we were talking about you this morning. Does Tidjane represent a rebirth… a phoenix rising from the flames of banks assurance as well… because you are an insurer, you will become a banker. Do you see overlaps in the two where you can grow the business?
TT: I think there are things about insurance that will be relevant to banking. Certainly the understanding of customers' needs… asset management… all that is very important. The investment banking. There's some aspect of what we do which is about transferring risks within a period of time, transferring risks between counter parties, take what we do for variable annuity in the US, that's almost a pure investment banking business. Where we run it, where we hedge it, so as an insurer you also have to understand markets. Understand how they move and what that does for your customers. And actually there is a connection, see I'm saying I'm not going to say anything and then I answer. There are synergies between investment banking and private banking. And increasingly you see that the wealth creators in this economy, who have accumulated a lot of wealth, also have sophisticated needs in terms of the businesses they own. And there is synergy there. We are trying to get into that space… where you can actually both advise institutions and do things for the individual. But probably too much said on that already.
SS/GC: It feels like we're giving you the job interview here. That wasn't really the plan… Culturally, from your background, if you look at the difference in running Prudential and then running a major bank. What do you think your skill set is that you bring that works well with something like a Credit Suisse or another bank with a similar size and scale?
TT: I cannot answer specifically about Credit Suisse because I have not yet spent a day… I haven't spent a day there. Maybe what I can do is look at what I did at Prudential… it's the situation which I am… I am here as CEO of Prudential. Talk about Prudential's results, which are very good. Our best year ever… And really you're talking about a new job which I haven't even started. And out of respect for Brady, for the institution, for people who work there, I have to reserve my comments for later. If you want to talk about things I've done, you have to look at my past and where I have been before. I'm more comfortable talking about the past than about the future.
SS/GC: The question is more about regulation… clearly, you've dealt with insurance regulation, the banking system, it's got a lot of regulation, regulatory issues they're talking about at the moment… particularly around fines…
TT: I mean – I made a comment this morning. I'm one of the few CEOs who've actually been in government. In a different context. I really think that gives me an understanding… not by any particular skill, it's just my experience. I've been very involved in running a country; I understand some of the tensions, the challenges of that… probably better than private sector people. That's a plus when you engage with authorities and regulators – I've been in their shoes. Thinking how can you get more tax and revenues. I've been on both sides of the barriers. The other thing is I really, really believe in teams. The word I've said the most today – as I'm transitioning, I've built a really good team and I'm leaving that behind. And that's the best source of value and future value for PRU. One thing I've done all my career, I've built good teams. I've played basketball as a sport. If you play basketball and you fight on that pitch, you've learnt a lot about team work, the weakest link and how you get together and pull each other forward. I'm a great believer in team work. And I've found that has applications everywhere.