Does Brian Chin have the worst job in banking?
Pity Brian Chin. While most banks (expect possibly J.P. Morgan) have ambitious plans for 2017 and beyond, Credit Suisse's plans for its global markets division are among the most misty-eyed of the lot. As head of Credit Suisse's global markets division, it's somehow up to Chin to pull them off.
As a reminder, Credit Suisse's aspirations for global markets are both simple and contradictory. The Swiss bank wants to increase global markets revenues (from $5.6bn in 2016 to $6bn at some point in the near future) whilst cutting costs (from $5.3bn in 2016 to $4.8bn) and keeping risk weighted assets allocated to the division broadly stable (from $58bn to $60bn). Fundamentally, Credit Suisse wants to be like Morgan Stanley, which succeeded in tripling its fixed income sales and trading revenues between the the fourth quarter of 2013 and the fourth quarter of 2016, despite having 25% less staff and 44% fewer risk weighted assets (RWAs) in its fixed income trading business.
There's good reason to think Chin's path at Credit Suisse will be rockier than that of his counterparts at Morgan Stanley though. As Deutsche Bank's analysts noted yesterday, Credit Suisse's global markets business is skewed towards equities sales and trading, and equities traders are having a slow year. Credit Suisse is also ill-placed to benefit from a pick-up in macro trading revenues after eviscerating its European rates business this time last year and losing some of its most senior macro traders in the U.S. And after two years of bad bonuses Credit Suisse is in danger of losing staff. Retention bonuses have been issued to 148 key "risk takers", but this still leaves 791 other CS risk takers prone to being picked off.
The good news is that senior Credit Suisse insiders tell us Chin is well-liked. "He's a really great guy," says one. "He's very personable and charismatic and is the kind of leader people would follow over hot coals. His style is all about trust and loyalty and camaraderie and people really respond to that."
As we noted last month, traders at Credit Suisse are much less likely to make big losses than traders at Deutsche Bank. At the same time, they're equally less likely to make big profits. As an accounting graduate from Rutgers University, it's tempting to attribute this to Chin's bean-counter mentality, but traders at Credit Suisse say this would be wrong. "He's a trader's trader," insists one. "It's just that we're kept on a very tight leash."
Rather than an accountant, what Chin really is, is a securitization guy. Chin was a securitization analyst at Deloitte before joining Credit Suisse in 2003. He was also global head of securitized products at Credit Suisse between 2012 and 2016 and a former head of agency trading in the securitized products group. This gives Chin a power base in Credit Suisse's historically strong securitization division. "The securitized producers are Chin's people," says one insider. "These are the guys he grew up with. - It's a very American trader mentality of loyalty to one another."
Unfortunately, this brings is own problems. Securitization is capital hungry and can be risky. Last year, Credit Suisse made around $600m of write downs on illiquid collateralised loan obligations traded by it securitized products division, prompting CEO Tidjane Thiam to call the division an "ugly duckling." Chin's power base can be a liability.
Curiously, Chin was promoted by Thiam to head global capital markets after last year's big securitization losses. As such, he's seen as Thiam's man. Markets insiders say former head Tim O'Hara was less willing to endorse Thiam's strategy of going for growth in Asia whilst pulling back from fixed income trading elsewhere: "Thiam was fed up with hearing no. - Chin was chosen because he'd say yes."
Having allegedly said yes, Chin is therefore now in the position of using his not inconsiderable charms to manage his notoriously demanding boss whilst keeping Credit Suisse's salespeople and traders happy. He needs to do this as he cuts costs and chases revenues in a market primed for a macro resurgence that CS is ill-prepared for. Citi has already poached Simon Francis, head of Credit Suisse's EMEA leveraged finance syndicate business. Chin needs to hope other banks don't get similar ideas.