Credit Suisse Faces Tough Choices on Investment Bank

By Margot Patrickabout 1 month ago

When Credit Suisse Group AG announced a $4.7 billion hit from the Archegos Capital Management meltdown, there was a silver lining: The rest of its investment bank did so well in the quarter, the overall pretax loss would only be $1 billion.

The situation exposes the banks dilemma. Its investment bank, which takes on more risk, has been its profit engine, making up for its larger, slower-growing wealth-management business. But now it is expected to be scaled back for safety, with Chief Executive Thomas Gottstein saying its structure and strategic relevance would be evaluated.

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The prospect of more restructuring costs and lost revenue in the unit has pushed some analysts to downgrade the stock, which is already down 25% since late February from the one-two blow of the collapse of another client, Greensill Capital, and then Archegos.

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