Credit Suisse is accelerating the restructuring of its operations which includes exiting activities that are not consistent with the bank's new strategy underlined by chief executive Tidjane Thiam (pictured) in June 2014. The future shape of the bank's global markets division will comprise an equities business, a restructured credit business and a solutions platform, which will aggregate Credit Suisse derivative capabilities across products as well as emerging markets. The bank's structured products business remains under the global markets umbrella, headed by Tim O’Hara.

The Swiss bank is also exiting distressed credit, European securitized product trading and long-term illiquid funding and is reducing capital allocation to other lines of business, including consolidating FX cash and options into its sales and trading services (STS) operations, which are part of the Swiss Universal Bank. Equities will remain a core area of focus for the bank and we will continue to build on our leading cash, prime and equity capital markets (ECM) franchises.

The Swiss bank was the top European provider of structured products globally in 2015, excluding leverage and flow products, with a 4% market share and over €9.5bn in sales. The bank has marketed over 12,529 products globally since 2002 of which over 5,000 structures are still live. Year to date, the Swiss bank has sold €1.3bn worth of structured products across jurisdictions and has slipped down the top 10 issuer ranking and is now trailing a number of European banks such as BNP Paribas, Unicredit, HSBC, Vontobel, Intesa San Paolo and Deutsche Bank. Credit Suisse has a low number of products on offer currently with just 26 products open for subscription including 19 in Switzerland and nine in the US market.

According to Thiam, regarding the bank's global markets activities, the combination of a high and inflexible cost base, exposure to illiquid inventory in fixed income, historically low levels of client activity and challenging market conditions "has led to disappointing financial results" with revenues weak in the period, "with negative operational leverage".

"In this context, we have taken immediate action to reduce outsized positions in activities not consistent with our new strategy and systematically reduced our exposures," said Thiam in a statement. "Our reconfigured global markets activities will consume less capital and produce more stable earnings with a more fee-based, client-driven model. We are reducing our RWA (risk-weighted asset) target from US$83-85bn announced in October 2015 to US$60bn and our leverage target from US$380bn to US$290bn by end-2016. Going forward, our activities will be more closely aligned to our wealth management and IBCM (investment banking capital markets) divisions."

Post restructuring, Credit Suisse's global markets is expected to achieve improved risk-adjusted returns through lower inventory and improved business mix. The business is expected to generate returns on regulatory capital at or above 15% in market conditions similar to those in 2014; while the maximum quarterly loss scenarios will be reduced by approximately 50% in a stressed scenario.

As part of the reorganisation, Credit Suisse has announced the launch of a joint venture between its international wealth management (IWM) division and Palantir Technologies, the artificial intelligence firm backed by the CIA's venture capital arm, to use data-driven behavioural analysis to tackle rogue traders and insider dealing, after the bank successfully used the fintech outfit to improve its investment bank compliance and risk monitoring.

The bank said IWM delivered resilient revenues year to date within private banking, driven by strong net interest income and strong new asset (NNA) inflows at CHF7.1bn year to date. The division continues to make progress in recruiting relationship managers, stated the bank.

Credit Suisse's investment banking and capital markets (IBCM) contributed to a number of marquee transaction wins in APAC during the quarter, with close global collaboration between teams in IBCM. The bank said IBCM continues to make strategic senior hires with a strong pipeline for the remainder of 2016.

In addition, Credit Suisse's wealth management businesses have delivered a strong performance year to date and continue to generate profitable growth. The bank is seeking to optimize its global markets activities by reducing its capital consumption and lowering the volatility of earnings going forward.

Overall, Credit Suisse posted an increase to its 2018 cost reduction target from CHF3.5bn gross savings to at least CHF4.3bn, which will drive its absolute operating cost base below CHF18bn by 2018. For 2016, the bank aims to achieve CHF1.7bn in cost savings.

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