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ZURICH Jan 7 Credit Suisse is accelerating a drive to scale back riskier fixed-income businesses following a tough 2013 and amid strict new regulation, moving further away from its traditional focus on investment banking.
The Swiss bank said in October it would shrink its interest rate trading arm, much of which is being transferred to a unit devoted to winding down discontinued businesses.
On Tuesday, it announced plans to cut risk-weighted assets (RWAs) at its discontinued businesses, which total 24 billion Swiss francs ($27 billion), by 58 percent by the end of 2015, compared with its previous target of cutting them by 41 percent.
It also said it aimed to slash leverage in the same areas by 76 percent, compared with 52 percent when it disclosed the plan in October, though the bank has made some changes to what it will transfer to the discontinued unit.
"As we exit those losses, you should see a significant improvement in the profitability of Credit Suisse," finance chief David Mathers told investors as the bank restated its earnings to account for the activities it is discontinuing.
The move reinforces a push by Credit Suisse to spread risk-taking more evenly between its two main units: private banking for the wealthy and investment banking. The bank wants the private bank to eventually account for half of the group's RWAs, against around a third currently.
Banks across the world are cutting back on riskier areas of business following the financial crisis and amid tougher regulation, and Credit Suisse has faced criticism from some analysts for being slower than some rivals.
The bank reported a plunge in third-quarter profit at its investment bank. It publishes fourth-quarter numbers on Feb. 6.
Investment banking has traditionally been a focus at Credit Suisse, particularly since its 1978 tie-up with New York-based First Boston to create the premier trading house of the 1980s.
The heyday of Credit Suisse First Boston, or CSFB, included an early foray into derivatives, which brought current Chief Executive Brady Dougan to the Swiss bank in 1990.
But a slew of regulatory scandals and embarrassing public setbacks followed for the bank, culminating in charges for obstructing justice against Frank Quattrone, the CSFB investment banker emblematic of the dotcom era.
After two trials, Quattrone reached a deferred prosecution agreement in August 2006 and the charges against him were dropped a year later. He opened boutique investment bank Qatalyst in 2008.
In 2006, the First Boston brand and logo disappeared into the bank's overall one, and by 2009, Credit Suisse had begun questioning its fixed income, currency and commodities trading business.
Yet the investment bank's headcount has hardly fluctuated in the past three years, and stood at 20,000 at the end of the third quarter. The bank doesn't disclose how many employees work in fixed income areas.
The restructuring efforts are twinned with the bank's existing goal to cut spending by more than 4.5 billion francs by the end of 2015.
($1 = 0.9037 Swiss francs) (Reporting by Katharina Bart and Oliver Hirt; Editing by Mark Potter)