Credit Suisse is in talks with another bank about a cost-sharing project that could unlock a new level of savings, as it seeks to refocus its business and offset rising industry costs. Tidjane Thiam, the bank’s chief executive, has told the Financial Times that the cost-sharing idea is at “proof of concept” stage – and hinted that the Swiss group might use an investor day in December to announce more ambitious money saving plans.
“There is a lot more we can do [on costs],” Mr Thiam said. “This is just the beginning.”
Stagnant revenues, rising regulatory costs and an inability to carry out big acquisitions have led global banks to pursue new ways of merging their cost bases – for example, by creating industry utilities that can carry out such tasks as trade processing and data collection for regulators.
Boston Consulting Group this year claimed that the potential savings from bank cost sharing remained a “pipe dream”, given the difficulty in securing agreement between a large number of banks, and the banks’ own fear of losing control of certain functions.
However, Mr Thiam said he was a big believer in the cost-sharing concept. “If we have two servers and a bank has two servers and each one is not fully utilised, why can’t we share that capacity?” he said. “Often, when [banks] trade securities, we trade the same securities and we each have ... those huge databases where we have a lot of information on securities. We could have that as a utility. So this is something we are definitely having conversations about.”
He insisted that Credit Suisse’s cost-sharing project had been designed to avoid some of the problems that stymied earlier industry efforts. “We don’t like such conversations without purpose,” Mr Thiam said. “We are talking to one specific bank and have asked the teams to come up with one specific idea that we can implement successfully and take it from there.”
Credit Suisse has a three-year target of cutting Sfr2bn ($2bn) from its “normalised” cost base in 2015, taking it down to Sfr19bn. Many analysts now believe the bank can beat that target. Details of its cost-sharing project remain “confidential” but it would be scalable, Mr Thiam said. “It takes somebody creating something concrete and, as it works, you bring in more volume and you aggregate others. “In the end it’s not about costs, for me it’s about productivity,” he added, blaming his “obsession” with productivity on his training as an engineer.
Among the cost-sharing utilities launched by banks so far are a post-trade and regulatory reporting platform pioneered by Barclays and SunGard in 2015, and a digital currency project launched by UBS and later adopted by Deutsche Bank, Santander, BNY Mellon and broker ICAP.