Credit Suisse investment bank has long lost the shine of the old days. The business has turned into a real money destroying machine. It is now partially outsourced, as the big bank announced Thursday morning. Credit Suisse is planning a radical restructuring that investment banking should no longer turn its income statement deep red.
The new investment bank will be known as CS First Boston. Thus, Credit Suisse is taking an old brand out of the mothballs box it scrapped in 2006. At that time, the bank wanted to gather all business areas under one brand. Now step back.
Transfer fees like in football
Investment bank CS First Boston (CSFB) began in 1978 with the merger of Credit Suisse with First Boston Corporation – initially still under the name Financière Crédit Suisse-First Boston.
The CSFB represents an eventful history of ups and downs, with top people earning salaries in the double-digit millions and a $225 million “transfer fee” for a top banker. An astronomical sum that stood out even on Wall Street at the time, and was reached only once when Neymar was transferred in today’s football circus. The Brazilian transferred from Barcelona to Paris Saint-Germain in 2017 for 222 million euros.
In 1989, Credit Suisse took over the majority of CSFB and helped it get out of serious financial difficulties. Previously, CSFB financed an expensive acquisition but failed to repay hundreds of millions of dollars. In 1996 CS bought all the shares.
Majority stays in CS
In the 1990s and early 2000s, CSFB was at the forefront of high-risk investment banking deals. The best bankers can make hundreds of millions in a short time – or lose more and more. One of these miracle workers was Frank Quattrone, 67, as CSFB allegedly bought it from Deutsche Bank for $225 million in 1998. Quattrone is said to have pocketed 40 million a year and won hundreds of millions of jackpots within three years.
The same risk mindset has caused billions of dollars in investment banking losses at the Archegos hedge fund and Greensill funds in recent years. Things will get better with the revival of CS First Boston, where CS will continue to hold the majority. According to CS, a “respectable” investor will also join with 500 million. The bank still keeps his name secret.