- Thiam says China's transformation is `extraordinary'
- UBS CEO said in interview that China is a `great opportunity'
Credit Suisse Group AG Chief Executive Officer Tidjane Thiam said he remains positive on China, echoing comments by his counterpart at UBS Group AG, following an equity selloff and a deepening economic slowdown.
“I went to China first in 1984 -- anybody who’s been to China in 1984 can only be a China bull,” Thiam, 53, said at a conference in Paris on Tuesday, when addressing an audience including Bank of England Governor Mark Carney and Bundesbank President Jens Weidmann. “Because the transformation is just extraordinary.”
Financial firms have been rocked by turbulence in Chinese markets, with plunging equity markets prompting authorities to intervene amid a deepening economic slowdown. Asia’s largest economy has also been hurt by capital outflows and currency volatility as some investors try to profit from gaps between the onshore and offshore yuan rates.
The Shanghai Composite Index has dropped about 15 percent since the beginning of the year. Declining global stock markets have also driven down banks, with Credit Suisse losing 8.7 percent and UBS down 9.8 percent in that period.
“Yes there will be growing pains, yes they’re changing their model from export-led capital intensive growth to consumerism, but I think they’ll manage,” Thiam said about China. “Overall, we remain positive on emerging markets.”
Thiam’s comments come just a day after UBS CEO Sergio Ermottisaid in an interview with Bloomberg Television in Shanghai that “China is a great opportunity, like it has been for the last 20 years.” Switzerland’s largest bank plans to double its staff in the country in five years, according to Ermotti.
The amount controlled by millionaires in China is expected to climb by an average of about 12 percent a year to $8.25 trillion by 2020, according to research by Julius Baer Group Ltd.
Thiam, who took over from Brady Dougan last year, has said he plans to expand in wealth management, especially in Asia, increase the lender’s onshore presence in China, and shut parts of the investment bank to boost capital and profitability. At Credit Suisse, “we feel more comfortable” after raising about 6 billion francs ($6 billion), he said.
‘Hike to Nowhere’
“To go to your shareholders and ask for more money -- you can do it,” Thiam said. “You can’t do it too often, it doesn’t make you very popular and it’s an expensive way to raise capital. The question of structural profitability remains at the heart of all this -- if we can’t reach a position where we’re structurally profitable, we’re on a hike to nowhere.”
As part of its overhaul, Credit Suisse will eliminate some 5,600 jobs across the U.S., the U.K. and Switzerland and cut 3.5 billion francs in costs by the end of 2018. The Zurich-based bank will also shrink its capital-intensive macro business and cut the amount of risk-weighted assets at the prime services unit, which caters to hedge funds.
“A big challenge for me is how do we lower the fixed-cost base in the bank,” Thiam said. “Clearly certain business lines are not viable anymore. All that implies a lot of adjustment, cost cuts, firing people.”
Credit Suisse is scheduled to report full-year earnings on Feb. 4.