The Credit Suisse building at 11 Madison Ave. | Sapir organization
Last week, Credit Suisse announced that it was going to restructure, once again. He plans to raise a lot of money, lay off 15% of his staff, and resurrect First Boston, a good brand of investment banking in the 1990s. Somewhere the ghost of Bruce Wasserstein is smiling.
From now on, the focus will be on the bank’s historical strength in wealth management. It sounds sensible, but it raises a question: how do you sell your ability to manage other people’s money when you’ve wasted so much of your own?
Credit Suisse stock was trading at $76 a share five years ago. Today, it fetches less than $4 and trades for a pathetic 27% of its book value, underscoring investors’ lack of confidence in management’s ability to turn the situation around. The stock fell 20% last week after the bank unveiled its restructuring plans, as it is how far investors believe their holdings will be diluted after Credit Suisse raises 4 billion Swiss francs of capital next month to fill a hole in its balance sheet.
The best parts of its investment banking business are sold to Apollo and Pimco. But Credit Suisse retains part of the underperforming markets division, complicating the rationalization story.
Either way, First Boston is back, and it has a nice nostalgic sound to it. If names such as Wasserstein and Gordon Rich resonate with you, I invite you to read Barbarians at the door, a heartbreaking Wall Street thread that features enterprising First Boston bankers jostling to participate in the biggest leveraged buyout of the era. It’s a fabulous book. Alas, the story is over 30 years old.