Credit Suisse smells the spilled coffee, seeks new beans to grind among China’s new millionaires
Moving past fall of Starbucks rival, Zurich-based bank plans to double headcount and revenue
Hong Kong — Credit Suisse plans to double its headcount in China over five years as the firm accelerates its pursuit of the nation’s wealthy, seeking to move past a scandal that has engulfed once-favoured client and Luckin Coffee founder Lu Zhengyao.
The bank has largely normalised approvals for Chinese companies, ending the increased scrutiny on loans that followed allegations of fabricated earnings at Luckin and a slowdown to weigh the effect of Covid-19. Credit Suisse will add to its China workforce as it targets a 100% increase in revenue there, Asia CEO Helman Sitohang said in an interview. Its China securities venture had 154 staff at the end of 2019, and the lender also offers financing, trading, wealth and asset management on the mainland.
Much of the firm’s buildout will focus on expanding advisory and investment banking services for the ballooning ranks of China’s rich. Sitohang’s plans are key to Credit Suisse meeting its goal of doubling the contribution to revenue growth that comes from ultrawealthy strategic clients over the next three years. Separately, the lender has embarked on a wide-ranging assessment of risk controls after a series of deals linked to troubled companies, including Luckin.
“China is our strongest focus when it comes to headcount, and infrastructure growth compared to any country in the world,” Sitohang said. “The worst of Covid-19’s impact on the region’s business activity is behind us,” he said, referring to Asia.
Asia’s largest economy has the most millionaires after the US and its financial opening this year has presented global banks and asset managers with an unmatched opportunity for expansion. Credit Suisse wants Asia to make up 25% of group revenue in a couple of years, from 17.5% now, people familiar with the matter said, declining to be named discussing internal matters.
The downfall of Starbucks rival Luckin and its billionaire founder blindsided Credit Suisse and other lenders, who are fighting to recoup losses on more than $500m in margin loans. The Swiss bank, the lead underwriter for Luckin’s public offering, launched an internal review, though CEO Thomas Gottstein has said it will continue to target China’s wealthy entrepreneurs.
Credit Suisse is not alone in setting ambitious hiring targets for China and will have to compete with the likes of Goldman Sachs, JPMorgan Chase and others. Goldman Sachs plans to double its headcount to 600 by 2025, while Swiss rival UBS Group aims to do the same, taking its investment-bank staff to 400.
Goldman Sachs’s and Morgan Stanley’s Asian operations contributed 13% and 12%, respectively, to their global net revenues in 2019. UBS Asia accounted for 16% of its global operating income.
Sitohang made a significant hire in June with Wang Jing, who headed private banking at China Merchants Bank. Wang brought with her nearly three decades of banking experience, including helping to build the Shenzhen-based lender into the nation’s largest manager for wealthy clients.
On the investment banking side, in April Credit Suisse became one of the latest global firms to win approval to take full control of a venture it has run with Founder Securities since 2008. Tim Tu and Daniel Qiu were this year named as CEO and head of investment banking and capital markets respectively for the China joint venture, which has so far struggled with revenue, $22m in 2019.
About 30 bankers at the joint venture were pushed out in July as Credit Suisse plans to recruit fresh talent, a person familiar said.
The Zurich-based bank’s latest earnings point to other successes in its Asia push, with net new assets in the region’s private banking business swelling by 80% in the second quarter amid a trading boom. Wealth and investment banking advisory, the biggest growth areas, both posted record revenue in the first six months, driven by growth in China as markets recovered.
Sitohang, who has spent years turning around the Asian trading operation, ceded oversight of the unit in a global restructuring that is folding trading into a new investment bank. The region’s markets division posted a 54% jump in revenue in the first half.
Gottstein announced the revamp at the end of July by merging its advisory and trading business to generate Sf400m annually for reinvestment, which includes as many as 500 job cuts in Switzerland. The bank plans to deploy two-thirds of its overall capital into wealth management. Sitohang said he does not plan to cut any jobs on his turf, since the region’s workforce is “lean enough”.
“The capital released doesn’t happen overnight, but the efficiency that we expect on the cost side as well as on the capital side will be deployed back into the wealth management,” he said. “Asia will be a priority.”
Stuck and unable to travel out of Hong Kong since early March, his longest stretch in one city since 1989, Sitohang said the past few months have proved that the bank’s business model works even under the most difficult conditions.
There were lessons learnt, but the “portfolio model” in Asia that spreads risk has been vindicated, he said.
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