Credit Suisse Group AG is tapping the brakes on its China expansion, postponing its biggest project, in a sign that weakness in Asia’s largest economy is prompting global banks to temper ambitious growth plans.
The Zurich, Switzerland-based lender has delayed the targeted launch of its locally incorporated bank by a year to 2024, the second postponement since the project was conceived two years ago, people familiar with the matter said.
A local bank would allow Credit Suisse to build a branch network to fuel its wealth management business, the people said.
The project has been delayed by a sluggish industrywide licensing process on the mainland and, more recently, questions from some senior Credit Suisse executives in Zurich on the need to pour resources into the project as COVID-19 lockdowns and an unprecedented crackdown on private enterprise are slowing the economy and hurting dealmaking, one of the people said.
Credit Suisse on Wednesday warned it would post a loss in the second quarter and that it would speed up cost cuts amid challenging markets, weak customer flows and client deleveraging, citing the Asia-Pacific region specifically.
The bank is weighing job cuts across regions and divisions such as investment banking and wealth management, the people said.
The delay for the local bank project came as Credit Suisse is also slowing hiring on the mainland. The firm in 2020 gained control over its securities venture in the country, and has plans to take full ownership. It last year said it planned to triple its headcount in China over the next few years.
“Credit Suisse is committed to China as a strategic market in our overall regional APAC [Asia-Pacific] footprint, and there is a clear mandate to remain on track with the continued build-out of our onshore franchise across wealth management, investment banking and asset management, as the Chinese regulatory and market opportunities allow,” a bank spokeswoman said. “As part of our strategy, we continue to invest in our China footprint including our immediate focus of taking full ownership of our securities joint venture, as we have stated previously.”
The firm added more than 200 employees in China last year, but plans to slow the pace of hiring this year partly due to the license delay, a person familiar with the matter said.
Credit Suisse’s ability to expand its existing venture has been hampered by the opaque regulatory framework in China. The securities regulator has yet to make an on-site inspection of the firm after it gained control over its securities venture in 2020.
That is the final step needed before it is allowed to start building out its wealth management business and expand securities services beyond Shenzhen into other cities, the people said.
Meanwhile, the Swiss firm is grappling with a string of scandals that led to billions of dollars of losses and a global restructuring.
A massive capital commitment to China has become a harder sell as shoring up the confidence of shareholders has become the firm’s main priority, the people said.
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