When Credit Suisse Group AG announced a $ 4.7 billion hit following the collapse of Archegos Capital Management, there was a silver lining: the rest of its investment bank performed so well in the quarter that the total pre-tax loss was just $ 1 billion.
The situation exposes the bank’s dilemma. Her risk-taking investment bank was her profit engine, offsetting her larger, slower growing asset management business. But now it is expected to be scaled back for security, with Chief Executive Thomas Gottstein saying its structure and strategic relevance will be evaluated.
The prospect of more restructuring costs and lost earnings in the unit has prompted some analysts to cut its stock, which has already fallen 25% since late February following the one-two punch of the collapse of another client, Greensill Capital, and then Archegos .
Eoin Mullany, an analyst at Berenberg Bank, said risk-taking at the investment bank and at Credit Suisse is likely to be curtailed and that “will inevitably lead to slower growth and lower revenues.”
Even before the recent accidents, Credit Suisse was one of a number of European banks whose longstanding problems made it difficult to invest in.