Credit Suisse Group's Oswald Gruebel and John Mack presented the biggest annual loss in European banking history as they made their public debut as co-chief executive officers of the second-largest Swiss bank.
The loss of SF3.3 billion (US$2.4 billion) is more than twice the combined 2002 losses of HVB Group and Commerzbank AG, two of Germany's biggest lenders. Gruebel and Mack are slashing costs, cutting jobs and selling businesses after three years of falling stock prices and US$22 billion in acquisitions.
Credit Suisse expects to become profitable this year, helped by lower costs after investment losses, bad loans, legal expenses and falling investment-banking revenue erased profit last year. The company said today it will cut an additional 1,250 jobs in Switzerland, including 350 jobs at the Winterthur insurance unit.
"They have to thoroughly change their strategy in 2003," said Thomas Buri, who helps oversee about SF120 billion at Pictet & Cie and has been selling Credit Suisse shares since December. "They have to clean house."
Mack and Gruebel have to scale back a five-year expansion into insurance and investment banking that was led by former CEO Lukas Muehlemann, investors said. The purchases made Credit Suisse more vulnerable to falling equities than rival UBS AG, which spent the late 1990s cutting costs after it was created from the merger of Swiss Bank Corp and Union Bank of Switzerland in 1998.
Muehlemann left in December after five years, making way for Mack, 58, the former Morgan Stanley president who heads the Credit Suisse First Boston securities business in New York. German-born Gruebel, 59, was brought out of retirement in July to replace Thomas Wellauer and oversee the Credit Suisse Financial Services unit that includes private and consumer banking and insurance.
Muehlemann was replaced as chairman by Walter Kielholz, the former CEO of Swiss Reinsurance Co, the world's No. 2 reinsurer.
Muehlemann, 52, bought the New York-based investment bank Donaldson, Lufkin & Jenrette Inc. in 2000 for US$13 billion to strengthen Credit Suisse First Boston's telecommunications and junk-bond businesses. Three years earlier he paid SF13.3 billion for Switzerland's Winterthur Insurance Co as a cushion against losses from other units and to cross-sell products to the two companies' customers.
double whammy
Both purchases backfired as stock markets soured. Mack has spent the past 19 months cutting costs, including 6,500 jobs, at Credit Suisse First Boston as mergers and share sales dwindled.
Credit Suisse Financial Services is cutting about 1,600 jobs to pare expenses amid lower fees and commissions from wealthy clients and insurance losses. The unit will cut an additional 900 jobs in private and consumer banking, Credit Suisse said today.
Winterthur's insurance and life and pensions businesses together had about SF2.4 billion in losses last year as lower stock markets forced it to write down the value of investments.
"Credit Suisse will have to prove itself in 2003," said Christoph Ritschard, an analyst at Zuercher Kantonalbank who rates the shares "market performer." "Last year it set important cornerstones, getting rid of some old burdens and securing itself against future risks."
Winterthur returned to profit in the fourth quarter after cutting the amount of equities in its funds to 6 percent from 18 percent at the start of last year. The insurer had SF131.3 billion in investments at the end of December.
"The question is whether the writedowns from the losses on the equity portfolio of Winterthur are enough, or if there is still more to come this year," said Michel Raemy, who helps manage about 1 billion francs at Banque Bonhote & Cie, including Credit Suisse shares.
Credit Suisse's fourth-quarter loss stemmed from expenses at Credit Suisse First Boston. The division had a US$811 million loss after it set aside US$450 million for lawsuits claiming it issued biased stock research, sought kickbacks for shares of new stock and defrauded investors of Enron Corp, the failed energy trader.
SECURITY: As China is ‘reshaping’ Hong Kong’s population, Taiwan must raise the eligibility threshold for applications from Hong Kongers, Chiu Chui-cheng said When Hong Kong and Macau citizens apply for residency in Taiwan, it would be under a new category that includes a “national security observation period,” Mainland Affairs Council (MAC) Minister Chiu Chui-cheng (邱垂正) said yesterday. President William Lai (賴清德) on March 13 announced 17 strategies to counter China’s aggression toward Taiwan, including incorporating national security considerations into the review process for residency applications from Hong Kong and Macau citizens. The situation in Hong Kong is constantly changing, Chiu said to media yesterday on the sidelines of the Taipei Technology Run hosted by the Taipei Neihu Technology Park Development Association. With
CARROT AND STICK: While unrelenting in its military threats, China attracted nearly 40,000 Taiwanese to over 400 business events last year Nearly 40,000 Taiwanese last year joined industry events in China, such as conferences and trade fairs, supported by the Chinese government, a study showed yesterday, as Beijing ramps up a charm offensive toward Taipei alongside military pressure. China has long taken a carrot-and-stick approach to Taiwan, threatening it with the prospect of military action while reaching out to those it believes are amenable to Beijing’s point of view. Taiwanese security officials are wary of what they see as Beijing’s influence campaigns to sway public opinion after Taipei and Beijing gradually resumed travel links halted by the COVID-19 pandemic, but the scale of
A US Marine Corps regiment equipped with Naval Strike Missiles (NSM) is set to participate in the upcoming Balikatan 25 exercise in the Luzon Strait, marking the system’s first-ever deployment in the Philippines. US and Philippine officials have separately confirmed that the Navy Marine Expeditionary Ship Interdiction System (NMESIS) — the mobile launch platform for the Naval Strike Missile — would take part in the joint exercise. The missiles are being deployed to “a strategic first island chain chokepoint” in the waters between Taiwan proper and the Philippines, US-based Naval News reported. “The Luzon Strait and Bashi Channel represent a critical access
Pope Francis is be laid to rest on Saturday after lying in state for three days in St Peter’s Basilica, where the faithful are expected to flock to pay their respects to history’s first Latin American pontiff. The cardinals met yesterday in the Vatican’s synod hall to chart the next steps before a conclave begins to choose Francis’ successor, as condolences poured in from around the world. According to current norms, the conclave must begin between May 5 and 10. The cardinals set the funeral for Saturday at 10am in St Peter’s Square, to be celebrated by the dean of the College
RSS