Credit Suisse ready to ditch cautious approach, says new risk chief

Swiss lender moves away from recent conservative mindset to pursue more profitable business

Credit Suisse is once again preparing to take on riskier business after a series of high-profile crises had prompted the bank to adopt a more cautious approach, according to the Swiss lender’s new chief risk officer.

David Wildermuth, who joined from Goldman Sachs in January, said the bank was “moving the pendulum back the other way” after ditching risker clients following the “catastrophic events” the business suffered last year.

“It’s the second time in my career I feel I’m as much a cheerleader for taking on more risk as I am for reducing risk — the other time was right after the financial crisis,” he told investors at an event on Tuesday.

“As I’m going out and meeting with clients and our teams, I think we do want to take smart risk, where we really understand the risk, we are aware of the risk and we understand detailed outcomes of the risk,” he added.

Credit Suisse is trying to restore investors’ confidence after a bruising 18 months that exposed poor risk controls, left the bank with the biggest trading loss in its history and hammered its share price. Last spring the lender was hit by the twin collapses of specialist finance firm Greensill Capital and family office Archegos.

However, its decision to rein in risk-taking has hit revenues, leaving the bank under pressure to pursue more profitable business while also avoiding more missteps.

Addressing investors, Wildermuth said: “There are big risk opportunities out there and we’re doing that bit by bit.”

The crises had prompted the bank to adopt a more conservative approach. It reduced its risk-weighted assets by $31.4 billion (€30 billion) and cut its leverage exposure by $94 billion, while also closing accounts for its riskiest clients.

Credit Suisse cut its exposure to riskier corporate borrowers by 17 per cent last year. The bank also announced that it would be closing its prime services business, the division where Archegos was a client.

As part of the bank’s new strategy unveiled last November, a revamped executive team has called on all staff members to see themselves as risk managers.

Wildermuth said the bank’s cautious approach to managing risk last year led it to reduce its net exposure to Russia by 56 per cent in the months leading up to Moscow’s invasion of Ukraine.

Also speaking at the investor day on Tuesday was Francesco De Ferrari, who started running the bank’s wealth management business in January.

The bank’s reputational issues had hit the business, De Ferrari said, but he added that the division’s focus on entrepreneurs had helped to maintain the loyalty of clients.

“They’ve been through difficult times with their own businesses, and actually we have built the strongest franchises at Credit Suisse in moments of difficulty,” he said.

“Now that we are in difficulty, I hear a lot of support from our clients.” — Copyright The Financial Times Limited 2022