Feb. 15 (Bloomberg) -- Credit Suisse Group named Brady Dougan, the head of its investment bank, to succeed Oswald Gruebel as chief executive officer as earnings rose to a record.
Switzerland's second-largest bank said Dougan, a 47-year-old American and former derivatives trader, will take over in May. Gruebel, 63, revived the company's profit during his five years as CEO of the Zurich-based bank.
Credit Suisse lagged behind competitors such as UBS AG and Goldman Sachs Group Inc. in stock performance and profitability for most of this decade. In the fourth quarter, growth surpassed most rivals as profit quadrupled to 4.67 billion francs (3.8 billion), led by asset sales and revenue from securities trading.
``What Dougan's shown this year is that he has turned around the investment bank, which had serious problems,'' said Patrick Lemmens, who helps manage $3.5 billion, including Credit Suisse stock, at ABN Amro Asset Management in Amsterdam. ``It was losing market share left and right.''
Paul Calello, head of the Asia Pacific region, will take over from Dougan running the securities unit. Credit Suisse also said Robert Shafir, the former head of equities at Lehman Brothers Holdings Inc., will join the bank as chief executive of the Americas.
Credit Suisse shares rose 3.1 francs, or 3.5 percent, to 91.80 francs at 9:22 a.m. in Zurich. Since the end of the third quarter, Credit Suisse shares have gained 27 percent, beating the 3 percent gain in UBS. That's a reversal from the past five years, during which Credit Suisse stock returned 65 percent, including reinvested dividends, less than half UBS's 134 percent.
Investment Bank
Dougan rose through the ranks during 17 years at the company, and took over the investment bank when John Mack left as co-CEO of Credit Suisse in 2004.
Dougan joined Credit Suisse in 1990 from Bankers Trust, when he helped set up a derivatives unit under the leadership of Allen Wheat. Three years later, he became co-head of bond underwriting and origination and helped make the firm No. 2 in underwriting U.S. debt in 1994, up from fifth in 1992, according to figures from the firm.
Wheat put Dougan in charge of the firm's flagging equities unit, which at that point was barely breaking even. Dougan met his target of generating pretax profit of $1 billion before bonuses by 2000. The same year, Wheat promoted Dougan again, putting him in charge of investment banking as well as equities alongside Charles Ward, 52.
As head of the investment bank, Dougan battled to cut costs which outstripped rivals including Goldman and Lehman. Last year, he ordered bankers to cut back on offsite meetings, staff parties and color photocopying. He also increased trading with the bank's own money, or proprietary trading, to boost profit.
Record Earnings
In the fourth quarter, pretax earnings at the investment bank surged to a record 2.34 billion francs from 286 million francs a year earlier, helped by ``strong contributions across the underwriting, advisory, fixed income trading and equity trading business,'' Credit Suisse said today. Analysts forecast profit of 902 million francs.
``Businesses in which Credit Suisse holds a strong position, including leveraged finance, were very positive in the fourth quarter,'' Andreas Venditti, a Zurich-based analyst at Zuercher Kantonalbank, said in a note before today's report.
The securities unit, formerly known as Credit Suisse First Boston, won fees in the fourth quarter from Industrial & Commercial Bank of China Ltd's $22 billion initial public offering, the world's largest ever.
The company last month said it plans to invest 4 billion francs to expand in areas such as commercial mortgage-backed securities, leveraged finance and alternative investments.
`Work Is Done'
``I'm retiring because my work here is done,'' Gruebel said on a conference call today. ``I came back in 2002 when we had a job to return the company to profitability.''
Gruebel said on Jan. 12 that he was confident about 2007 and ``very optimistic'' for investment banking. The company has pledged to raise profit to 8.2 billion francs this year, a 40 percent increase from 2005.
At the main wealth management unit, profit gained 15 percent to 811 million francs in the fourth quarter, while earnings at the Swiss consumer bank gained 3.1 percent to 332 million francs. Credit Suisse's asset management unit said profit slumped to 89 million francs from 241 million francs.
Credit Suisse, the world's fourth-largest manager of money for those with at least $1 million to invest, also set aside 3.5 billion francs from the sale of its Winterthur insurance unit for potential money-management takeovers in the U.S., the Middle East and Asia, where economic growth outpaces Europe.
The bank last year opened wealth management offices in Sydney, Moscow, Beirut and Doha, and in December agreed to buy a majority stake in Brazilian asset manager Hedging-Griffo for 358 million francs. Credit Suisse will also ``explore opportunities in Belgium, Central and Eastern Europe, Turkey and India,'' the bank said in a statement Jan. 22.
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Source: Bloomberg.com
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