Finance

Credit Suisse M&A fees swell 184% despite dealmaker exodus

Credit Suisse’s M&A bankers hauled in 184% more fees in the latest quarter than they did during the same period last year, despite an exodus of dealmakers in a unit rocked by successive crises this year.

The Swiss bank’s M&A unit made CHF305m in revenues during the third quarter, its best three-month performance since 2018, as the world’s largest investment banks were buoyed by an unprecedented deal boom so far this year.

Credit Suisse’s revenues were nearly double analysts’ expectations for the quarter.

The Swiss bank’s investment banking business will become more central to the overall unit’s success, after Credit Suisse revealed on 4 November that it was shuttering most of its prime broking business — which was at the heart of its $5.5bn loss related to the collapse of Archegos Capital — and shifting $3bn of capital out of the business towards its wealth management under a new shift in strategy.

READ Credit Suisse shutters prime broking after $5.5bn Archegos hit in pivot towards wealth management

With the bank hit by both the Archegos collapse and its exposure to now-defunct supply chain finance firm Greensill Capital, Credit Suisse had been losing key dealmakers. At least 30 have departed since March, largely in the US. The Swiss bank has recruited a number of top bankers over the same period, but faces stiff competition for talent as banks look to capitalise on the frenzy of deals.

Overall, revenues within Credit Suisse’s investment bank were up 11% to CHF2.3bn during the quarter. The results were helped by a CHF188m reduction in expected costs from unwinding the division’s positions surrounding Archegos.

Profits in the business rose 108% to CHF770m.

Credit Suisse’s group pre-tax profits were CHF1bn, ahead of the CHF863m expected by analysts as it benefited from a CHF235m overall release related to Archegos.

While most investment banks have been increasing pay this year, compensation costs at Credit Suisse fell by 8% during the third quarter. The bank pinned this on clawbacks of previously awarded bonuses within its investment bank as a result of the Archegos scandal.

“Our objectives are clear: we want to become a stronger, more customer-centric bank that puts risk management at the very core of its DNA to deliver sustainable growth for investors, clients and colleagues,” chief executive Thomas Gottstein said in a statement.

READ Six Credit Suisse dealmakers jump to Jefferies amid Archegos fallout

Credit Suisse has been leapfrogged by Barclays in the investment banking league tables so far in 2021, according to data provider Dealogic, slipping from fifth to sixth place. This comes amid a deal boom that has meant banks hauled in a record $93bn in fees so far this year.

Wall Street banks including Citigroup, JPMorgan and Morgan Stanley all managed to post record results for their M&A divisions this year, as deal volumes have hit $4.7tn so far in 2021. The top five US banks increased investment banking revenues by an average of 54%, with M&A fees swelling by an average of 193%.

Credit Suisse said that it expected to post a loss in the fourth quarter as a result of a CHF1.6bn impairment related to its 2000 acquisition of rival investment bank Donaldson, Lufkin & Jenrette.

To contact the author of this story with feedback or news, email Paul Clarke

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