Because of still challenging market-making conditions, Credit Suisse Group is set to either downsize or cut altogether some securitization businesses and fixed-income units.
In a presentation this morning on 3Q11 results, Brady Dougan, chief executive officer at Credit Suisse, said that the bank is downsizing or exiting fixed-income areas where it cannot
"meet our return hurdle."
One of the fixed-income areas Credit Suisse plans to get out of is CMBS origination. It also intends to downscale less capital-efficient businesses in securitized products.
This is part of a reorganization that will cause the bank to reduce its headcount worldwide by 3%.
Aside from these areas, the bank is also downscaling or exiting its long-dated unsecured trades in global rates, emerging markets and commodities.
In his presentation, David Mathers, Credit Suisse chief financial officer, said that securitized products revenues are still at reduced 2Q11 levels with coninued low client activity. He added that the results in the credit businesses are weak "due to substantial widening of credit spreads, low trading volumes and losses on inventory positions held for client trading businesses."
Dougan also mentioned areas that the bank has had a dominant position in and would like to "defend and evolve into growth markets."
In securitized products, one sector that was singled out was private-label securitized trading and the bank's emerging markets structured finance business. Some credit product areas such as leveraged finance and investment grade are also considered part of this group.
He also mentioned fixed-income sectors where Credit Suisse is planning to continue to invest, grow and build a strong market position. These are foreign exchange, global rates, emerging markets (Brazil, Southeast Asia, Greater China and Russia) and commodities.
JPMorgan Reorganizes Too
JPMorgan has reorganized its debt capital markets group by combining it with its syndicated leveraged finance business, according to an internal memo from the bank's Global Head of Investment Banking Jeff Urwin. The memo was obtained by ASR sister publication Leveraged Finance News.
These two units will become one global group called global debt capital markets.
Andy O’Brien and Jim Casey will become co-heads of this group. Jointly managing the origination of the bank's high grade and high yield debt across the loan and bond markets, according to Urwin, will allow "us to provide clients with integrated, global solutions for all their debt financing needs."
O'Brien and Casey will continue to report to Urwin and, for the risk aspects of their role, to Daniel Pinto, JPMorgan's chief executive of EMEA and co-head of global fixed income.