- Asset-management head Varvel gets new responsibilities
- Global markets unit has suffered losses in recent quarters
Credit Suisse Group AG’s Timothy O’Hara is leaving after 10 months running the bank’s largest division and will be replaced by a deputy who leads the trading unit that blindsided Chief Executive Officer Tidjane Thiam with losses earlier this year.
Brian Chin, a 39-year-old based in New York, will take over the global markets unit, becoming one of 11 managers on Thiam’s executive board, the Zurich-based bank said in a statement. O’Hara, 52, is leaving after 30 years at the bank, the final months as the CEO of a new division created when Thiam split the investment bank in a strategic overhaul. The stock rose 1.6 percent in Zurich trading Wednesday.
Thiam accelerated cuts to the trading unit’s costs and jobs in March after the credit business that Chin helped lead contributed to more than $1 billion of losses over the course of six months. The formal decision to replace O’Hara was made yesterday, although it had been in the works for a while, according to one person familiar with the matter who asked not to be identified speaking about internal company processes.
“This the latest sign of flux at the markets business,” said Chirantan Barua, an analyst with Sanford C. Bernstein in London who has an underperform rating on the bank’s shares. “Credit Suisse is under stress. For a CEO that is rationing capital while trying to fix a cyclical downturn – the strategy is kind of broken.”
Credit Suisse has fallen 37 percent this year. The shares rose to 12.99 francs in Zurich trading, their biggest gain in a week.
Thiam has announced two restructuring plans since taking over in July 2015, eliminating thousands of jobs and risky investments to shift away from securities trading. Still, losses at the global markets unit have frustrated his efforts to focus on Asia and wealth management. Job and bonus cuts, along with the perception that investment bankers were getting the blame for management lapses, depressed morale at Credit Suisse’s trading unit, employees of the bank said earlier this year.
“I am confident that these management changes that I have proposed and that have been approved by the board of directors of Credit Suisse Group AG will drive a continued improvement in the performance of our bank," Thiam said Tuesday in the statement.
Chin had served as co-head of credit and ran the securitized products unit. As part of the second strategy overhaul announced in March, where O’Hara was the only division head that addressed investors alongside Thiam, the bank said it would cut back in U.S. securitized products and exit the business in Europe.
That came after the units that trade corporate bonds and securitized products contributed to more than $600 million in so-called mark-to-market losses in the fourth quarter of 2015, and another $400 million in the first quarter of this year. Credit trading dropped 41 percent in the first half of the year, the largest drop in the markets division.
Before the losses, the securitized business was a standout for the bank. Credit Suisse’s unit ranked first by revenue in 2014 and tied for third in 2015, garnering a large slice of the $22 billion those businesses produced for the 12 largest global investment banks over the two years, according to data from Coalition Development Ltd.
“Since joining the bank in 2003, Brian has been one of our strongest risk managers and has been an integral part in developing the strength of our global markets franchise,” Thiam said in the statement.
Chin studied accounting at Rutgers University, where he graduated in 2000. He worked at Deloitte LLP before joining Credit Suisse.
The appointment of a fixed-income manager bucks a recent trend among the top trading jobs at large banks. Equity executives were put in charge of all trading last year at Morgan Stanley and Deutsche Bank AG, as well as Credit Suisse when O’Hara was installed in October. Jim Amine, who runs Credit Suisse’s investment banking capital markets division, also has a fixed-income background as he used to work in leveraged finance.
Eric Varvel, who became global head of asset management in May, is assuming the additional post of president and CEO of Credit Suisse Holdings (USA). Chin’s roles as head of securitized products and as co-head of credit alongside David Miller will be filled “in due course,” a spokesman for the bank in New York said.
Less than a year ago, Thiam had defended the riskier parts of the global markets business, which contains Credit Suisse’s trading activities outside of Switzerland and Asia-Pacific. But the firm’s traders had ramped up holdings of distressed debt and other illiquid positions without many senior leaders’ knowledge, Thiam said in March.
“This wasn’t clear to me, it wasn’t clear to my CFO and to many people inside the bank” when the firm laid out a strategy last year, Thiam said in a Bloomberg Television interview in March. “There needs to be a cultural change because it’s completely unacceptable.”
Since then, Credit Suisse has reduced the division’s inventory of collateralized loan obligations and pared its portfolio of distressed corporate bonds. The smaller global markets unit returned to a profit in the second quarter. The bank said in July it had completed more than half of the 6,000 job cuts it planned for this year.
“I am especially thankful to Tim for steering global markets through its recent accelerated restructuring program, returning the division to profitability in Q2 and ensuring that some of the positive momentum of the division in Q2 has continued over the summer months,” Thiam said in the statement.