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Tidjane Thiam to join Credit Suisse this summer

Credit Suisse is replacing Brady Dougan with Tidjane Thiam, who is presently the top executive at the British insurer Prudential.

Even though the new chief executive has no experience to the private banking and investment market, he holds a strong reputation for making bold moves. It is said his joining to Credit Suisse would make rivals shiver.

The current status of trading bonds, currencies and commodities has been declining steadily, and banks like Credit Suisse are in need of more capital to get out of the profitability trap.

The investment bank of Credit Suisse generated only 8 percent return on equity in 2014.

Strip out various issues from funding costs to legacy assets and that improves, but for the past few years these so-called noncore charges have kept recurring.

Banks like Barclays, Goldman Sachs and JPMorgan Chase are grappling with the same problems. Return on equity rarely bests 12 percent for even the top performers. But it’s especially stark for the likes of Credit Suisse. Almost half of its 25 billon Swiss francs of revenue last year, and more than 60 percent of pretax earnings, stem from private banking and wealth management. Private banking and wealth management is a good, low-capital business that cranked out a pretax margin of about 30 percent in 2014, just ahead of its local rival, UBS. But the capital-intensive investment bank crowds out much of that performance.

Mr. Thiam can approach these problems with a blank slate, buoyed by a record at Prudential that has seen the stock triple in five years. Applying a no-holds-barred approach to Credit Suisse would serve shareholders well, as they seem to appreciate, given the more than 6 percent jump in the bank’s stock on Tuesday. It would also, of course, leave thousands of its bankers and traders wondering whether their jobs are safe.

Should Mr. Thiam take that route and have even a modicum of success, his new peers on Wall Street and the City of London will be hard pressed to resist following suit.

About Rachell M.

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