When the chief executive of the British insurer Prudential prepared for his company’s 2010 annual meeting, he was told, only partly in jest, that he should bring along two suits.
A bold $35.5 billion (Dh130.4 billion) grab for the American International Group’s Asian business had lately drawn criticism from some shareholders, and it was suggested that they might throw eggs at him. In the end, no eggs were tossed, and the bid failed.
Shareholders gave the executive, Tidjane Thiam, a much more uplifting reception after Credit Suisse announced that he would succeed Brady W. Dougan as chief executive. Shares of Prudential slumped 2.6 per cent in disappointment over his departure, while shares of Credit Suisse — which have been moribund for several years — closed up 6.7 per cent.
That turnabout reflects the rise of Thiam’s reputation in London financial circles. It also reflects expectations that he will change the course of the Swiss banking company, which in recent years has had large legal expenses, largely as a result of its role in helping Americans evade taxes.
Tidjane Thiam will cut an unusual figure for a Swiss bank chief. An African francophone, he has never worked for an investment bank. He has completed stints at McKinsey, the World Bank and two insurance companies since 2009. He was the head of one of those insurers, Prudential, which has no relation to the US company with the same name.
Dougan, in contrast, worked on the derivatives, bond trading and equity trading desks at Credit Suisse’s investment bank, which has large operations, in his 25 years at the bank.
So can someone with virtually no banking experience turn around one of the world’s biggest banks?
The need for someone with Thiam’s skills and experience speaks volumes about the state of global banking today. More and more, regulation is pushing banking to be more like insurance: cautious and with a deeper understanding of underwriting and managing risk.
While Credit Suisse under Dougan emerged relatively unscathed from the financial crisis, the bank has been criticised for not taking more significant steps toward shrinking its more capital-intensive investment bank and expanding its wealth-management business.
UBS, its larger Zurich rival, was bailed out by the Swiss government and radically reshaped itself out of the chaos of the experience.
Analysts at Berenberg Bank said that the “hope would be a downsizing of the investment bank and a focus on the private bank à la UBS.”
Thiam has “great risk expertise” and experience in wealth management, as well as a track record in building new markets in places like Asia, Urs Rohner, the chairman of the Credit Suisse board, said. “He is the right man for the helm of our bank,” he said.
In interviews Tuesday, Thiam, 52, played down his lack of experience in investment banking. “If you talk about investment banking, Prudential has an $800 billion balance-sheet, and we deal with exactly the same issues, whether it’s interest rates or markets,” he was quoted as saying on Bloomberg Television. “There is a lot of overlap.”
Still, his lack of ties to the investment bank may mean he will be able to make cuts that Dougan may have been reluctant to make. “With new management comes the potential for a new strategy,” said Matt Spick, an analyst with Deutsche Bank.
The change at Credit Suisse will be effective in June and will come after a rough few years. Last year, Credit Suisse admitted to American authorities that its bankers had enabled clients to illegally evade US taxes. It pleaded guilty to one count of conspiring to aid tax evasion and agreed to pay about $2.6 billion in penalties and hire an independent monitor for up to two years.
The settlement allowed the bank to put a troubling and expensive episode largely behind it, and at the time there was no talk of Dougan moving on. But continued poor performance at the bank weighed on his tenure, say people briefed on the departure.
Last month, Credit Suisse reported that it returned to a profit in the fourth quarter, earning about $993 million, but it also told investors to brace for continued fallout from the legal settlements.
Thiam arrives with plenty of experience in the trenches with regulators and shareholders. Soon after taking the helm of Prudential in March 2009, he led an attempt to take over AIA, the Asian arm of the American International Group, a deal that he said would transform the British insurer.
But a battle ensued, and the takeover ultimately failed. During the bid, Thiam met Dougan, who, with Jamie Dimon of JPMorgan Chase, backed his bid to buy AIA before AIG’s board.
The deal fell through after shareholders baulked at the price and the huge issue of new shares that would have accompanied it. The two men have been friends since the deal, Dougan said.
Thiam lost the bid but may have won the argument: AIA went public soon after the failed bid and is worth nearly three times as much today. Both Prudential and Credit Suisse view Asia as an area of high-growth potential.
In an unusual twist, Thiam became the only chief executive to be fined by British regulators in the financial crisis. In 2013, the Financial Services Authority fined Prudential $45.1 million, and censured Thiam for not informing the regulator of Prudential’s intention to bid for AIA and for not cooperating with the regulator.
Thiam was born in Ivory Coast to a family with powerful political connections. He became the first Ivorian to pass the entrance examination to the exclusive École Polytechnique in Paris in 1982. He received an MBA from Insead, the business school, in 1988, and then worked for McKinsey, the consulting firm, in New York and Paris.
In the early 1990s, he returned to his country to work as a technocrat. He eventually became the nation’s minister for planning and development, promoting the privatisation of many industries.
When he was out of the country in 1999, the Ivorian military staged a coup. He flew back and was put under house arrest.
In 2000, he was released and left the country. He worked for McKinsey again, then for the insurance company Aviva. He was named chief executive of Prudential in 2009, becoming the first black chief executive of a FTSE 100 company.
Thiam leaves Prudential on a high note. It reported that full-year 2014 operating profit rose 8 per cent to 3.2 billion pounds from 2.95 billion pounds in 2013.
Thiam said it was the right time for him to go. “The job is not to stay for as long as possible,” he said. “The job is to do the job for a period of time, to leave a company that is better than the one you received and can continue to grow and do well.”
