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Credit Suisse (CS) Gets Digitized With Restructuring Moves

Zacks Equity Research

In the present era of digitization, Swiss Universal Bank, a unit of Credit Suisse CS, has planned restructuring moves to transform its branch to a digital one. Particularly, spending hundreds of millions of Swiss francs, the bank plans to transition the retail and commercial clients to a newly-formed "direct banking" unit, effective Sep1.

Further, per the restructuring plan, the investment banking unit of the bank will be transferred from the corporate and investment banking business unit, and will be reported directly to the CEO of Swiss Universal Bank (SUB). Also, spending around three-digit million francs, the SUB unit will pursue digital client business, and hire new staff for running client advisory business and marketing unit.

Negative interest rates, competitive markets, elevated pressure on margins and transforming customer needs, together with other factors, have led Credit Suisse to take a step forward toward digital banking. Notably, lack of digitization has resulted in low market share for Credit Suisse’s retail banking, catering small number of young customers.

"The new business area is our response to the significant changes in the market environment in recent years," Thomas Gottstein, CEO of SUB and Credit Suisse [Switzerland] Ltd., said in the announcement. "Maintaining the status quo was not an option — not least because we believe that the achievement of long-term success will not depend on having the biggest branch network in the future," Gottstein further noted.

Per the plan, the new direct banking unit will be catering 1 million retail clients, 60,000 commercial clients and 500 employees. The leader of IT and operations unit of SUB will lead this unit.

Improved telephone customer service, along with more number of working hours and employees, will follow the digital transformation, differentiating Credit Suisse from other big banks. Notably, the bank will roll out further details in the first half of 2020.

Our Viewpoint

Customers have been increasingly using digital devices for financial transactions. Furthermore, banks have been witnessing tremendous growth in the number of active mobile users. Hence, in order to capitalize on this trend, banks are rolling out technology advancements. In addition, this is in sync with the industry-wide focus on right sizing branch networks and enhancing customer satisfaction.

Introduction of digital technology remains cost effective for banks as well. Additionally, intensifying competition from financial technology firms (FinTech) is driving banks to digitize their operations.

Currently, Credit Suisse carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Credit Suisse have gained around 5% year to date as against the industry’s decline of 6.3%.



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