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New chairman turns to China in downturn

By Hu Yuanyuan (China Daily)
Updated: 2009-05-25 08:00

Hans-Ulrich Doerig: The biggest challenge is to attract more high-profile clients in China. [China Daily]

Hans-Ulrich Doerig, the new chairman of Credit Suisse Group AG, sees China as a growth engine that can pull his bank through the global economic downturn.

Doerig, who took charge of the biggest Swiss bank by market value in April, has been coming to China for 25 years and said the country is an important part of his plans.

"I came here for better communication with clients. The biggest challenge for me right now is to attract more high-profile clients in China," Doerig told China Daily.

Credit Suisse was the joint bookrunner of the $9.2 billion IPO of China Construction Bank in 2005 and the $21.9 billion IPO of Industrial and Commercial Bank of China in 2006, which was the world's largest to date. It is now planning to be involved with preparations by Agricultural Bank of China (ABC) for a dual listing on the Hong Kong and Shanghai bourses.

"It is part of our strategy to get involved in major IPOs. We have expressed our interest and are waiting for feedback from ABC," said Doerig.

Despite the challenging market environment, Credit Suisse has helped a number of Chinese companies get listed in Hong Kong and the US in March and April this year, including Changyou.com, a Chinese online role-playing game operator, which was the first US IPO by a company from an Asian country other than Japan since August 2008.

Credit Suisse currently has three joint ventures, Credit Suisse Founder Securities, ICBC Credit Suisse Asset Management Limited and China Renaissance Capital Investment, none of which offer retail banking.

"We will continue to do what we are good at and have no plan to develop a retail banking business in China since we don't have a deposit base here. So far, investment banking is the largest contributor to profit but we see more opportunities in mergers and acquisitions (M&A), trade finance and private banking this year," said Doerig.

The bank was part of several M&A deals last year, such as the $4.7 billion sale of Wing Lung Bank to China Merchants Bank and the $3.1 billion sale of Tuas Power to China Huaneng.

But Credit Suisse seems to have little interest in making any major acquisitions by itself.

"It will surprise me if we do a big M&A this year because we are large enough to survive on our own and we have a solid recipe, strategy and position. We don't want to be the largest bank. Instead we want to be one of the most respected banks," said Doerig.

According to Doerig, big acquisitions are difficult and can throw off a bank's operations in unforeseen ways.

"Being bigger through acquisition is not necessarily the best choice. Merging two entities that are not complementary will be a disaster," said Doerig.

But Credit Suisse may consider smaller acquisition opportunities that complement the bank's existing business, said Doerig.

"As the top management, if we don't look for good opportunities throughout the year, we are not doing our job," Doerig added.

Credit Suisse reported a net income of $1.7 billion in the first quarter, rebounding from a $1.9 billion loss in same period a year earlier but Doerig said the bank will still take a conservative approach this year, given the uncertainties in the market.

"We've de-risked, and we are going to do more de-risking by considerably reducing proprietary trading," said Doerig.

Credit Suisse's tier one capital adequacy ratio stood at 14.1 percent at the end of March, the highest among large banks.

Its loan-to-deposit ratio is around 120 percent.

According to Doerig, the biggest problem in the financial world over the next six to 12 months is going to be re-financing banks.

The International Monetary Fund estimates the financial crisis has cost banks $2.6 trillion.

Half the losses, or about $1.3 trillion, have already been refinanced. But additional funding, either from the public or private sector, is needed to cover the rest.

"But is the international market ready for re-financing? Probably not," said Doerig.