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Business

Goldman to cut thousands of staff as Wall Street layoffs intensify -source

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NEW YORK, Dec 16 (Reuters) – Goldman Sachs Group Inc (GS.N) is planning to cut thousands of employees to navigate a difficult economic environment, a source familiar with the matter said.

The layoffs are the latest sign that cuts are accelerating across Wall Street as dealmaking dries up. Investment banking revenues have plunged this year amid a slowdown in mergers and share offerings, marking a stark reversal from a blockbuster 2021 when bankers received big pay bumps.

Goldman Sachs had 49,100 employees at the end of the third quarter after adding significant numbers of staff during the pandemic. Its headcount will remain above pre-pandemic levels, the source said. The workforce stood at 38,300 at the end of 2019, according to a filing.

The number of employees that will be affected by the layoffs is still being discussed, and details are expected to be finalized early next year, the source said.

The bank is weighing a sharp cut to the annual bonus pool this year, a separate source familiar with the matter said. That contrasts with increases of 40% to 50% for top-performing investment bankers in 2021, Reuters reported in January, citing people with direct knowledge of the matter.

“GS needs to show that its costs are as variable as its revenues, especially after a year when it provided special rewards to top managers during the boom times,” wrote Mike Mayo, a banking analyst at Wells Fargo.

“Goldman Sachs now needs to show that it can do the same when business is not as good and that they live up to the old Wall St. adage that they ‘eat what they kill,'” he said in a note.

The company’s stock fell 1.3% in afternoon trading alongside shares of JPMorgan & Chase Co (JPM.N) and Morgan Stanley (MS.N), which fell 0.6% and 1.3%, respectively.

Goldman shares have slumped almost 10% this year. But they have outperformed the broader S&P 500 bank index (.SPXBK), which is down 24% year to date.

[1/2] The logo for Goldman Sachs is seen on the trading floor at the New York Stock Exchange (NYSE) in New York City, New York, U.S., November 17, 2021. REUTERS/Andrew Kelly/File Photo

CONSUMER BANK STRUGGLES

The latest plan would include hundreds of employees being cut from Goldman’s consumer business, a source said.

The bank signaled it was scaling back its ambitions for Marcus, the loss-making consumer unit, in October. Goldman also plans to stop originating unsecured consumer loans, a source familiar with the move told Reuters earlier this week, another sign it is stepping back from the business.

Chief Executive Officer David Solomon, who took the helm in 2018, has tried to diversify the company’s operations with Marcus. It was placed under the wealth business in October as part of a management reshuffle that also merged the trading and investment banking units.

Trading and investment banking — the traditional drivers of Goldman’s profit — accounted for nearly 65% of its revenue at the end of the third quarter, compared with 59% in the third quarter of 2018, when Solomon took the top job.

Semafor earlier on Friday reported that Goldman will lay off as many as 4,000 people as the bank struggles to meet profit targets, citing people familiar with the matter.

Goldman Sachs declined to comment.

The latest plans come after Goldman cut about 500 employees in September, after pausing the annual practice for two years during the pandemic, a source familiar with the matter told Reuters at the time.

The investment bank had first warned in July that it might slow hiring and reduce expenses.

Global banks, including Morgan Stanley (MS.N) and Citigroup Inc (C.N), have reduced their workforces in recent months as a dealmaking boom on Wall Street fizzled out due to high interest rates, tensions between the United States and China, the war between Russia and Ukraine, and soaring inflation.

Reporting by Saeed Azhar and Lananh Nguyen; Additional reporting by Noor Zainab Hussain and Mehnaz Yasmin in Bengaluru; Editing by Mark Porter

Our Standards: The Thomson Reuters Trust Principles.

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Business

Exclusive: Goldman Sachs on hunt for bargain crypto firms after FTX fiasco

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LONDON, Dec 6 (Reuters) – Goldman Sachs (GS.N) plans to spend tens of millions of dollars to buy or invest in crypto companies after the collapse of the FTX exchange hit valuations and dampened investor interest.

FTX’s implosion has heightened the need for more trustworthy, regulated cryptocurrency players, and big banks see an opportunity to pick up business, Mathew McDermott, Goldman’s head of digital assets, told Reuters.

Goldman is doing due diligence on a number of different crypto firms, he added, without giving details.

“We do see some really interesting opportunities, priced much more sensibly,” McDermott said in an interview last month.

FTX filed for Chapter 11 bankruptcy protection in the United States on Nov. 11 after its dramatic collapse, sparking fears of contagion and amplifying calls for more crypto regulation.

“It’s definitely set the market back in terms of sentiment, there’s absolutely no doubt of that,” McDermott said. “FTX was a poster child in many parts of the ecosystem. But to reiterate, the underlying technology continues to perform.”

While the amount Goldman may potentially invest is not large for the Wall Street giant, which earned $21.6 billion last year, its willingness to keep investing amid the sector shakeout shows it senses a long term opportunity.

Its CEO David Solomon told CNBC on Nov. 10, as the FTX drama was unfolding, that while he views cryptocurrencies as “highly speculative”, he sees much potential in the underlying technology as its infrastructure becomes more formalized.

Rivals are more sceptical.

“I don’t think it’s a fad or going away, but I can’t put an intrinsic value on it,” Morgan Stanley (MS.N) CEO James Gorman said at the Reuters NEXT conference on Dec. 1.

HSBC (HSBA.L) CEO Noel Quinn, meanwhile, told a banking conference in London last week he has no plans to expand into crypto trading or investing for retail customers.

Goldman has invested in 11 digital asset companies that provide services such as compliance, cryptocurrency data and blockchain management.

McDermott, who competes in triathlons in his spare time, joined Goldman in 2005 and rose to run its digital assets business after serving as head of cross asset financing.

His team has grown to more than 70 people, including a seven-strong crypto options and derivatives trading desk.

Goldman Sachs has also together with MSCI and Coin Metrics launched data service datonomy, aimed at classifying digital assets based on how they are used.

The firm is also building its own private distributed ledger technology, McDermott said.

‘TRUSTED’ PLAYERS

The global cryptocurrency market peaked at $2.9 trillion in late 2021, according to data site CoinMarketCap, but has shed about $2 trillion this year as central banks tightened credit and a string of high-profile corporate failures hit. It last stood at $865 billion on Dec. 5.

The ripple effects from FTX’s collapse have boosted Goldman’s trading volumes, McDermott said, as investors sought to trade with regulated and well capitalized counterparties.

“What’s increased is the number of financial institutions wanting to trade with us,” he said. “I suspect a number of them traded with FTX, but I can’t say that with cast iron certainty.”

Goldman also sees recruitment opportunities as crypto and tech companies shed staff, McDermott said, although the bank is happy with the size of its team for now.

Others also see the crypto meltdown as a chance to build their businesses.

Britannia Financial Group is building its cryptocurrency-related services, its chief executive Mark Bruce told Reuters.

The London-based company aims to serve customers who are eager to diversify into digital currencies, but who have never done so before, Bruce said. It will also cater to investors who are very familiar with the assets, but have become nervous about storing funds at crypto exchanges since FTX’s collapse.

Britannia is applying for more licenses to provide crypto services, such as doing deals for wealthy individuals, he said

“We have seen more client interest since the demise of FTX,” he said. “Customers have lost trust in some of the younger businesses in the sector that purely do crypto, and are looking for more trusted counterparties.”

Reporting by Iain Withers and Lawrence White, Editing by Lananh Nguyen and Alexander Smith

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Business

FX swap debt a $80 trillion ‘blind spot’ global regulator says

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LONDON, Dec 5 (Reuters) – Pension funds and other ‘non-bank’ financial firms have more than $80 trillion of hidden, off-balance sheet dollar debt in FX swaps, the Bank for International Settlements (BIS) said.

The BIS, dubbed the central bank to the world’s central banks, also said in its latest quarterly report that 2022’s market upheaval had largely been navigated without major issues.

Having repeatedly urged central banks to act forcefully to dampen inflation, it struck a more measured tone and picked over crypto market troubles and September’s UK bond market turmoil.

Its main warning concerned what it described as the FX swap debt “blind spot” that risked leaving policymakers in a “fog”.

FX swap markets, where for example a Dutch pension fund or Japanese insurer borrows dollars and lends euro or yen before later repaying them, have a history of problems.

They saw funding squeezes during both the global financial crisis and again in March 2020 when the COVID-19 pandemic wrought havoc that required central banks such as the U.S. Federal Reserve to intervene with dollar swap lines.

The $80 trillion-plus “hidden” debt estimate exceeds the stocks of dollar Treasury bills, repo and commercial paper combined, the BIS said. It has grown from just over $55 trillion a decade ago, while the churn of FX swap deals was almost $5 trillion a day in April, two thirds of daily global FX turnover.

For both non-U.S. banks and non-U.S. ‘non-banks’ such as pension funds, dollar obligations from FX swaps are now double their on-balance sheet dollar debt, it estimated.

“The missing dollar debt from FX swaps/forwards and currency swaps is huge,” the Switzerland-based institution said, adding the lack of direct information about the scale and location of the problems was the key issue.

Off and on-balance sheet dollar debt

CLOSER

The report also assessed broader recent market developments.

BIS officials have been loudly calling for forceful interest rate hikes from central banks as inflation has taken hold, but this time it struck a more measured tone.

Asked whether the end of the tightening cycle may be looming next year, the head of the BIS’ Monetary and Economic Department Claudio Borio said it would depend on how circumstances evolve, noting also the complexities of high debt levels and uncertainty about how sensitive borrowers now are to rising rates.

The crisis that erupted in UK gilt markets in September also underscored that central banks could be forced to step in and intervene – in the UK’s case by buying bonds even at a time when it was raising interest rates to curb inflation.

“The simple answer is one is closer than one was at the beginning, but we don’t know how far central banks will have to go,” Borio said about interest rates.

“The enemy is an old enemy and is known,” he added, referring to inflation. “But it’s a long time since we have been fighting this battle”.

Market volatility

DINO-MITE

The report also focused on findings from the recent BIS global FX market survey, which estimated that $2.2 trillion worth of currency trades are at risk of failing to settle on any given day due to issues between counterparties, potentially undermining financial stability.

The amount at risk represents about one third of total deliverable FX turnover and is up from $1.9 trillion from three years earlier when the last FX survey was carried out.

FX trading also continues to shift away from multilateral trading platforms towards “less visible” venues hindering policymakers “from appropriately monitoring FX markets,” it said.

The bank’s Head of Research and Economic Adviser Hyun Song Shin, meanwhile, described recent crypto market problems such as the collapse of the FTX exchange and stable coins TerraUSD and Luna as having similar characteristics to banking crashes.

He described many of the crypto coins sold as “DINO – decentralised in name only” and that most of their related activities took place through traditional intermediaries.

“This is people taking in deposits essentially in unregulated banks,” Shin said, adding it was largely about the unravelling of large leverage and maturity mismatches, just like during the financial crash more than a decade ago.

Reporting by Marc Jones; Editing by Toby Chopra and Alexander Smith

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Business

Tesla cuts Dec Model Y output at Shanghai plant by more than 20% versus Nov – sources

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SHANGHAI, Dec 5 (Reuters) – Tesla (TSLA.O) plans to cut December output of the Model Y at its Shanghai plant by more than 20% from the previous month, two people with knowledge of electric vehicle (EV) giant’s production plan said on Monday.

Tesla did not immediately respond to a request for comment on the planned cut, first reported by Bloomberg, and Reuters was unable to immediately ascertain the reason for reduction.

Inventory levels at Tesla’s Shanghai plant rose sharply after it completed an upgrade of the manufacturing facilities in summer, with EV inventory increasing at its fastest pace ever in October.

The U.S. automaker has cut prices for Model 3 and Model Y cars by up to 9% in China and offered insurance incentives, which helped boost the November sales of its China-made cars by 40% from October and 89.7% more compared to a year ago.

Tesla delivered 100,291 China-made EVs in November, the highest monthly sales since its Shanghai factory opened in late 2020, Xinhua reported on Monday citing Tesla.

Tesla’s high inventory levels in Shanghai come as China’s auto market faces slowing demand and disruptions to local supply chains.

Uncertainty over when China will make significant move to relax its “dynamic zero-COVID” strategy have clouded the outlook for the world’s largest car market, though some Chinese cities have taken steps to ease some restrictions following protests in recent weeks.

Globally, Tesla had planned to push production of the Model Y and Model 3 EVs sharply higher in the fourth quarter as newer factories in Austin, Texas and Berlin ramp production, Reuters reported in September.

The company is planning to start production of a revamped version of Model 3 in the third quarter of 2023 in Shanghai, as it aims to cut production costs and boost the appeal of the five-year-old electric sedan. read more

Reporting by Zhang Yan and Brenda Goh; Editing by Kim Coghill, Kenneth Maxwell and Simon Cameron-Moore

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Business

Shares rise, U.S. Treasury yields drop ahead of Fed minutes’ release

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  • Fed minutes for November due at 1900 GMT
  • Wall Street stocks trade higher
  • U.S. Treasury yields retreat
  • Crude prices drop more than 4%
  • U.S. dollar falls

NEW YORK, Nov 23 (Reuters) – World equities rose while U.S. Treasury yields were lower ahead of the release of the Federal Reserve’s meeting minutes that would offer a glimpse on whether officials are likely to soften their stiff monetary policy stance.

Traders are expecting the minutes, which will be published on Wednesday, to provide clues that the Fed is set to end its pace of sharp interest rate hikes in response to a moderation in economic conditions.

Labor Department data showed on Wednesday that U.S. jobless claims increased more than expected last week while U.S. business activity contracted for a fifth month in November, according to the S&P Global flash U.S. Composite PMI Output Index.

“What investors are hoping for is that the Fed acknowledges that since the consumer price index looks like it might be peaking that there’s going to be some language that they see a pause on the near-term horizon,” said Jordan Kahn, chief investment officer at ACM Funds in Los Angeles, California.

The MSCI All Country stock index (.MIWD00000PUS) was up 0.8%, while European shares (.STOXX) rose 0.62%.

U.S. Treasury yields were trading lower. Benchmark 10-year notes were down to 3.7242% while the yields on two-year notes dropped to 4.4835%.

The yield curve that compares these two bonds widened further into negative territory, to -76.30 basis points. When inverted, that part of the curve is seen as an indicator of an upcoming recession.

“I tend to think that investors that are looking for any sought of hint of a pause are going to be disappointed. I think the Fed is going to keep the message they’ve been saying for a while, which is that their job isn’t done yet and need to bring down demand,” Kahn said.

“The yield curve is still screaming that the economy is on the precipice of a slowdown,” he added.

On Wall Street, all three major indexes were trading higher, led by gains in technology, consumer discretionary, communication, and industrial stocks.

The Dow Jones Industrial Average (.DJI) rose 0.29% to 34,196.78, the S&P 500 (.SPX) gained 0.56% to 4,025.81 and the Nasdaq Composite (.IXIC) added 0.96% to 11,282.14.

Oil prices fell more than 4% as the Group of Seven (G7) nations looked at a price cap on Russian oil that is above where it is currently trading and as gasoline inventories in the United States built more than analysts expected.

Brent futures for January delivery fell 4.2% to $84.65 a barrel, while U.S. crude fell 4.46%, to $77.34 per barrel.

The U.S. dollar fell across the board ahead of the release of the Fed’s minutes and new data showing weaker economic conditions. The dollar index fell 0.7%, with the euro up 0.62% to $1.0366.

Gold prices were choppy as the U.S. dollar fell. Spot gold added 0.1% to $1,742.66 an ounce, while U.S. gold futures fell 0.10% to $1,736.50 an ounce.

Reporting by Chibuike Oguh in New York
Editing by Bernadette Baum

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Business

Banking giants and New York Fed start 12-week digital dollar pilot

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NEW YORK, Nov 15 (Reuters) – Global banking giants are starting a 12-week digital dollar pilot with the Federal Reserve Bank of New York, the participants announced on Tuesday.

Citigroup Inc , HSBC Holdings Plc (HSBA.L), Mastercard Inc (MA.N) and Wells Fargo & Co (WFC.N) are among the financial companies participating in the experiment alongside the New York Fed’s innovation center, they said in a statement. The project, which is called the regulated liability network, will be conducted in a test environment and use simulated data, the New York Fed said.

The pilot will test how banks using digital dollar tokens in a common database can help speed up payments.

Earlier this month, Michelle Neal, head of the New York Fed’s market’s group, said it sees promise in using a central bank digital dollar to speed up settlement time in currency markets.

Reporting by Lananh Nguyen; Editing by Chizu Nomiyama

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Business

Buffett’s Berkshire discloses $4.1 bln TSMC stake

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Nov 14 (Reuters) – Berkshire Hathaway Inc (BRKa.N) said it bought more than $4.1 billion of stock in Taiwan Semiconductor Manufacturing (2330.TW), , a rare significant foray into the technology sector by billionaire Warren Buffett’s conglomerate.

The news sent shares in TSMC up more than 6% in Taiwan on Tuesday, as it boosted investor sentiment for the world’s largest contract chipmaker, which saw its shares hit a two-year low last month due to a sharp slowdown in global chip demand.

In a Monday regulatory filing describing its U.S.-listed equity investments as of Sept. 30, Berkshire said it owned about 60.1 million American depositary shares of TSMC.

Berkshire also disclosed new stakes of $297 million in building materials company Louisiana-Pacific Corp (LPX.N) and $13 million in Jefferies Financial Group Inc (JEF.N). It exited an investment in Store Capital Corp (STOR.N), a real estate company that agreed in September to be taken private.

The filing did not specify whether Buffett or his portfolio managers Todd Combs and Ted Weschler made specific purchases and sales. Investors often try to piggy back on what Berkshire buys. Larger investments are normally Buffett’s.

While Berkshire does not normally make big technology bets, it often prefers companies it perceives to have competitive advantages, often through their size.

TSMC, which makes chips for the likes of Apple Inc (AAPL.O), Qulacomm (QCOM.O) and Nvidia Corp (NVDA.O), posted an 80% jump in quarterly profit last month, but struck a more cautious note than usual on upcoming demand.

“I suspect Berkshire has a belief that the world cannot do without the products manufactured by Taiwan Semi,” said Tom Russo, a partner at Gardner, Russo & Quinn in Lancaster, Pennsylvania, which owns Berkshire shares.

“Only a small number of companies that can amass the capital to deliver semiconductors, which are increasingly central to people’s lives,” he added.

Berkshire has had mixed success in technology.

Its more than six-year wager during the last decade in IBM Corp (IBM.N) did not pan out, but Berkshire is sitting on huge unrealized gains on its $126.5 billion stake in Apple, which Buffett views more as a consumer products company.

Apple is by far the largest investment in Berkshire’s $306.2 billion equity portfolio.

Berkshire disclosed the TSMC stake about 2-1/2 months after it began reducing a decade-old, multi-billion dollar stake in BYD Co (002594.SZ), China’s largest electric car company.

In the third quarter, Berkshire added to its stakes in Chevron Corp (CVX.N), Occidental Petroleum Corp (OXY.N), Celanese Corp (CE.N), Paramount Global (PARA.O) and RH (RH.N).

It also sold shares of Activision Blizzard Inc (ATVI.O), Bank of New York Mellon Corp (BK.N), General Motors Co (GM.N), Kroger Co (KR.N) and US Bancorp (USB.N).

Buffett, 92, has run Berkshire since 1965. The Omaha, Nebraska-based company also owns dozens of businesses such as the BNSF railroad, the Geico auto insurer, several energy and industrial companies, Fruit of the Loom and Dairy Queen.

Reporting by Jonathan Stempel in New York; Editing by David Gregorio and Bradley Perrett

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Business

Musk sells Tesla shares worth $3.95 bln days after Twitter takeover

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Nov 8 (Reuters) – Tesla Inc (TSLA.O) Chief Executive Officer Elon Musk has sold $3.95 billion worth of shares in the electric vehicle maker, according to U.S. regulatory filings, days after he completed his purchase of Twitter Inc for $44 billion.

Musk, whose net worth dropped below $200 billion after investors dumped Tesla stock, unloaded 19.5 million shares between Friday and Tuesday, filings published by the U.S. Securities and Exchange Commission showed.

The latest share sale leaves Musk with a stake of roughly 14% in Tesla, according to a Reuters calculation.

The purpose of the sale was not disclosed.

The latest sale dump comes as analysts had widely expected Musk to sell additional Tesla shares to finance the Twitter deal.

Musk, the world’s richest man, had asserted in April he was done selling Tesla stock. Still, he went on to sell another $6.9 billion worth Tesla shares in August and said the sale was conducted to pay for the social media platform.

Musk, the world’s richest man, had about $20 billion in cash after selling a part of his stake in Tesla, including the sales made last year. This would have required him to raise an additional $2 billion to $3 billion to finance the takeover, according to a Reuters calculation.

Tesla has lost nearly half its market value and Musk’s net worth slumped by $70 billion ever since he bid for Twitter in April.

Twitter and Tesla did not immediately respond to Reuters’ requests for comment.

Musk took over Twitter last month and has engaged in drastic measures including sacking half the staff and a plan to charge for blue check verification marks.

The billionaire pledged to provide $46.5 billion in equity and debt financing for the acquisition, which covered the $44 billion price tag and the closing costs. Banks, including Morgan Stanley (MS.N) and Bank of America Corp (BAC.N), committed to provide $13 billion in debt financing.

Musk’s $33.5 billion equity commitment included his 9.6% Twitter stake, which is worth $4 billion, and the $7.1 billion he had secured from equity investors, including Oracle Corp (ORCL.N) co-founder Larry Ellison and Saudi Prince Alwaleed bin Talal.

Musk had tried to walk away from the deal in May, alleging that Twitter understated the number of bot and spam accounts on the platform. This led to a series of lawsuits between the two parties.

Reporting by Akriti Sharma in Bengaluru and Hyunjoo Jin in San Francisco; Editing by Sherry Jacob-Phillips

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Business

Credit Suisse seeks billions from investors in make-or-break overhaul

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ZURICH, Oct 27 (Reuters) – Credit Suisse plans to raise 4 billion Swiss francs ($4 billion) from investors, cut thousands of jobs and shift its focus from investment banking towards its rich clients, as the bank attempts to put years of scandals behind it.

The Swiss lender outlined on Thursday what its chairman Axel Lehmann dubbed a “blueprint for success”, after it racked up an unexpected 4 billion Swiss franc loss in the third quarter of the year.

The announcement followed torrid weeks for the bank and fell flat with investors. Its stock, which has plumbed record lows in recent weeks, dropped about 14 percent in early trading, valuing the embattled bank around 11 billion francs.

Credit Suisse said clients pulled funds in recent weeks at a pace that saw the lender breach some regulatory requirements for liquidity, underscoring the impact on its business of wild market swings and a social media storm.

The group added that it was stable throughout.

Analysts gave the announcement a lukewarm welcome. Vontobel’s Andreas Venditti said the bank was embarking on a “lengthy process to restore credibility”.

“Resolute execution and no further missteps will be key and it will take time until results will begin to show,” he said.

The turnaround plan has many elements, from cutting jobs to refocusing on banking for the wealthy.

It will cut 2,700 jobs or 5% of its workforce by the end of this year, and ultimately reduce its workforce by roughly 9,000 to about 43,000 by the end of 2025.

The Swiss bank said it also aims to separate out its investment bank to create CS First Boston, focused on advisory work such as mergers and acquisitions and arranging deals on capital markets.

The bank envisions selling a stake but keeping roughly 50% in the new business, said one person familiar with the issue. It is also exploring the possibility of an initial public offering, another source familiar with the matter said.

Saudi National Bank, majority-owned by the government of Saudi Arabia, said it will invest up to 1.5 billion francs in Credit Suisse to take a stake of up to 9.9% and may invest in the investment bank.

The move bolsters Saudi influence in one of Switzerland’s best-known banks. Olayan Group, one of the biggest Saudi family-owned conglomerates, with a multibillion dollar investment portfolio, also owns a 5% stake in the bank.

The Qatar Investment Authority – which owns about 5% of the Swiss bank – declined to comment on whether it plans to buy any shares.

Credit Suisse said it will create a capital release unit to wind down non-strategic, higher-risk businesses, while announcing plans to sell a large part of its securitised products business to an investor group led by Apollo.

The bank will also wind down some trading businesses in emerging markets and equities.

Its heavy loss in the third quarter was due in large part to write-offs linked to its investment banking overhaul, including adjustments for lost tax credits.

JPMorgan analysts said that “question marks remain” over the restructuring of investment banking, adding that the share sale would also weigh on the stock.

The latest revamp, aiming to overcome the bank’s worst crisis in its history, is the third attempt in recent years by successive CEOs to turn the group around.

Reuters Graphics Reuters Graphics

Once a symbol for Swiss reliability, the bank’s reputation has been tarnished by a series of scandals, including an unprecedented prosecution at home involving laundering money for a criminal gang.

The bank had been rushing to raise money and free up capital by selling assets, keen to limit how much cash it would have to raise from investors to fund its overhaul, handle its legacy litigation costs and retain a cushion for rough markets ahead.

Credit Suisse needs to revamp after a series of costly and morale-sapping blunders that triggered a wholesale change of management.

In refocusing away from risky investment banking to banking for the globe’s rich, Credit Suisse is following in the footsteps of its bigger Swiss rival, UBS.

The UBS turnaround succeeded in large part because of a flood of freshly printed money from the world’s central banks to reignite the economy during the financial crisis.

Credit Suisse, on the other hand, is attempting to refocus its business in a world facing war, an energy crisis, rocketing inflation and an economic slide.

Last year, the bank took a $5.5 billion loss from the unravelling of U.S. investment firm Archegos and had to freeze $10 billion worth of supply chain finance funds linked to insolvent British financier Greensill, highlighting risk-management failings.

Its deepening problems even put it on the radar of day traders earlier this month, when a frenzy of wild speculation about its health sent its stock price into a tailspin to a record low.

($1 = 0.9858 Swiss francs)

Additional reporting by Michael Shields in Zurich and Yousef Saba in Dubai; Writing by John O’Donnell; Editing by Edmund Klamann

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World

Saudi Arabia ‘maturer guys’ in spat with U.S., energy minister says

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  • OPEC+ oil output cut led to U.S., Saudi spat
  • Saudi Arabia and U.S. “solid allies” – minister
  • Big Wall St turnout at flagship Saudi investment summit

RIYADH, Oct 25 (Reuters) – Saudi Arabia decided to be the “maturer guys” in a spat with the United States over oil supplies, the kingdom’s energy minister Prince Abdulaziz bin Salman said on Tuesday.

The decision by the OPEC+ oil producer group led by Saudi Arabia this month to cut oil output targets unleashed a war of words between the White House and Riyadh ahead of the kingdom’s Future Investment Initiative (FII) forum, which drew top U.S. business executives.

The two traditional allies’ relationship had already been strained by the Joe Biden administration’s stance on the 2018 murder of Saudi journalist Jamal Khashoggi and the Yemen war, as well as Riyadh’s growing ties with China and Russia.

When asked at the FII forum how the energy relationship with the United States could be put back on track after the cuts and with the Dec. 5 deadline for the expected price-cap on Russian oil, the Saudi energy minister said: “I think we as Saudi Arabia decided to be the maturer guys and let the dice fall”.

“We keep hearing you ‘are with us or against us’, is there any room for ‘we are with the people of Saudi Arabia’?”

Saudi Investment Minister Khalid al-Falih said earlier that Riyadh and Washington will get over their “unwarranted” spat, highlighting long-standing corporate and institutional ties.

“If you look at the relationship with the people side, the corporate side, the education system, you look at our institutions working together we are very close and we will get over this recent spat that I think was unwarranted,” he said.

While noting that Saudi Arabia and the United States were “solid allies” in the long term, he highlighted the kingdom was “very strong” with Asian partners including China, which is the biggest importer of Saudi hydrocarbons.

The OPEC+ cut has raised concerns in Washington about the possibility of higher gasoline prices ahead of the November U.S. midterm elections, with the Democrats trying to retain their control of the House of Representatives and the Senate.

Biden pledged that “there will be consequences” for U.S. relations with Saudi Arabia after the OPEC+ move.

Princess Reema bint Bandar Al Saud, the kingdom’s ambassador to Washington, said in a CNN interview that Saudi Arabia was not siding with Russia and engages with “everybody across the board”.

[1/3] Saudi Arabia’s Minister of Energy Prince Abdulaziz bin Salman Al-Saud speaks at the Future Investment Initiative conference, in Riyadh, Saudi Arabia, October 25, 2022. REUTERS/ Ahmed Yosri

“And by the way, it’s okay to disagree. We’ve disagreed in the past, and we’ve agreed in the past, but the important thing is recognizing the value of this relationship,” she said.

She added that “a lot of people talk about reforming or reviewing the relationship” and said that was “a positive thing” as Saudi Arabia “is not the kingdom it was five years ago.”

FULL ATTENDENCE AT FII

Like previous years, the FII three-day forum that opened on Tuesday saw a big turnout from Wall Street, as well as other industries with strategic interests in Saudi Arabia, the world’s top oil exporter.

JPMorgan Chase & Co Chief Executive Jamie Dimon, speaking at the gathering, voiced confidence that Saudi Arabia and the United States would safeguard their 75-year-old alliance.

“I can’t imagine any allies agreeing on everything and not having problems – they’ll work it through,” Dimon said. “I’m comfortable that folks on both sides are working through and that these countries will remain allies going forward, and hopefully help the world develop and grow properly.”

The FII is a showcase for the Saudi crown prince’s Vision 2030 development plan to wean the economy off oil by creating new industries that also generate jobs for millions of Saudis, and to lure foreign capital and talent.

No Biden administration officials were visible at the forum on Tuesday. Jared Kushner, a former senior aide to then-President Donald Trump who enjoyed good ties with Prince Mohammed, was featured as a front-row speaker.

The Saudi government invested $2 billion with a firm incorporated by Kushner after Trump left office.

FII organisers said this year’s edition attracted 7,000 delegates compared with 4,000 last year.

After its inaugural launch in 2017, the forum was marred by a Western boycott over Khashoggi’s killing by Saudi agents. It recovered the next year, attracting leaders and businesses with strategic interests in Saudi Arabia, after which the pandemic hit the world.

Reporting by Aziz El Yaakoubi, Hadeel Al Sayegh and Rachna Uppal in Riyadh and Nadine Awadalla, Maha El Dahan and Yousef Saba in Dubai; Writing by Ghaida Ghantous and Michael Geory; Editing by Louise Heavens, Mark Potter, Vinay Dwivedi, William Maclean

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