(Bloomberg) -- Credit Suisse Group AG's appointment of Tidjane Thiam as chief executive officer boosted shareholder expectations that the firm will shift away from investment banking toward its more profitable money management businesses.
Brady Dougan, the investment banker who has led Switzerland's second-biggest lender since 2007, has faced pressure to reduce the focus on the securities unit as rules that demand higher capital hurt returns while the company's buffers weakened. The switch to Thiam, who has spent the past decade running insurance businesses, is a signal that the firm may follow competitors including UBS Group AG in making deeper cuts to the investment bank.
"Dougan, the dyed-in-the-wool investment banker, is being replaced by an expert on wealth and asset management and insurance," said Andreas Brun, an analyst at Zuercher Kantonalbank. "This could also give rise to a paradigm shift."
Credit Suisse shares gained 7.8 percent, the biggest gain in a month, in Zurich trading after CreditSuisse said Tuesday that Dougan will step down at the end of June. Thiam, 52, and a dual citizen of France and Ivory Coast, joins from Prudential Plc, Britain's largest insurer by market value. The stock has more than tripled during his tenure as CEO.
"I have a lot to learn," Thiam said in an interview with Bloomberg Television's Francine Lacqua. "It's a very different institution."
At a briefing in Zurich, Thiam addressed reporters in German, French and English, sitting next to Chairman Urs Rohner and Dougan. Rohner declined to comment on Thiam's compensation, saying that there's no sign-on bonus.
Given his background, the new CEO is likely to focus on wealth management and favor asset-based income streams over revenue from trading, said Matt Spick, an London-based analyst at Deutsche Bank AG, adding that this would be positive for the bank's share price.
Dougan, who steered the company through the financial crisis, has been criticized for not cutting the capital- intensive businesses at the investment bank enough, as Credit Suisse's balance-sheet strength trails that of competitors. A $2.6 billion fine last year for helping Americans evade taxes prompted speculation that the bank would need to raise capital.
Rohner said that Dougan decided to leave last year and there was no pressure from investors to replace him.
"I have made mistakes," Dougan said. "This would be a very long conversation if we go down that road," he added, smiling.
While the firm has increasingly focused on wealth management, cuts at the trading businesses have come bit by bit.
The investment-banking businesses that Credit Suisse intends to keep have more than twice the risk-weighted assets that UBS allocates to its securities businesses, for example. About half of Credit Suisse's 25.8 billion francs ($26 billion) of revenue came from investment banking in 2014, compared with 30 percent of the 28 billion francs of sales at UBS.
Credit Suisse is the fourth-biggest wealth manager in the world, while UBS is the market leader, according to the annual ranking by Scorpio Partnership.
"An outsider may be able to make the decisions that those within the bank couldn't because they were too wedded to them," said Andrea Williams, head of European equities at Royal London Asset Management Ltd. "It's a clean pair of hands," said Williams, who helps manage about 1.1 billion pounds ($1.7 billion) in European equities, including Credit Suisse.
Dougan, 55, an Illinois railway dispatcher's son, started his career at Banker's Trust Corp. He moved to Credit Suisse in 1990 as part of a team led by Allen Wheat, where they set up a derivatives unit called Credit Suisse Financial Products. He was the first American to serve as sole CEO of the Swiss firm.
Dougan "was on a good track for a while, during the crisis," said Peter Stenz, who helps manage 53 billion francs at Swisscanto Asset Management AG. "A little less so afterward. He may have held on to investment banking a bit too long."
Capital remains the key issue at Credit Suisse. The bank holds less capital relative to risk-weighted assets than its peers, data compiled by Bloomberg Intelligence show. The bank showed a common equity ratio of 10.1 percent at the end of December after restating earnings because of higher provisions for mortgage-related litigation.
Cutting back the investment bank more should boost the firm's profitability as measured by its return on equity, Goldman Sachs Group Inc. analysts wrote in a note to clients. Thiam's experience in Asia, an important growth market for Credit Suisse's wealth management business, may also lead the firm to expand in the region, analysts at Berenberg said in a note.
Thiam, who will be moving to Switzerland for his new role, said he's confident that he'll be able to grasp the investment- banking operations.
"I've studied physics and maths," he said. "There's more in a 28-year career than you can read in a resume. I don't have any worry."
Thiam worked for management consultant McKinsey & Co. from 1986 to 1994, focusing on insurers and banks. From 1994 to 1998, he was head of the National Bureau for Technical Studies and Development in the Ivory Coast.
He was appointed minister of planning and development before leaving the country after the December 1999 military coup. He has run Prudential since 2009 and Mike Wells, who has been CEO of London-based Prudential's Jackson National Life U.S. unit since 2010, will probably succeed him.
The company plans to make an announcement once the U.K. regulator has approved the choice, Chairman Paul Manduca said on a conference call on Tuesday, without commenting further.
Dougan was a "victim of his past," Ed Firth, head of European bank research at Macquarie Group Ltd. in London. He "struggled with the fact that the business he'd grown up in and played a key part in building was no longer one that investors liked."
