Credit Suisse is divided into four parts

Data: FactSet;  Graphic: Axios Visuals
Data: FactSet; Graphic: Axios Visuals

Until this week, Credit Suisse could credibly claim to be a top-tier bank, alongside perhaps eight others around the world. Maybe it was a trouble bank, but it was huge and tried to offer a full menu of financial services to its customers.

Why is this important: Now the bulge bracket has shrunk one bank. Credit Suisse has announcement that it is divided into four parts, echoing the history of GE end with a moan.

Between the lines: Credit Suisse was forced into this drastic action by its terribly low share price. The company’s market value is less than a quarter of its book value, or its assets minus its liabilities. This is a clear sign that the market does not see any significant profit in the foreseeable future.

How it works: The bank is divided into four unequal parts.

  • The securitized products groupwhich turns corporate cash flow into securities, is sold to Apollo and Pimco.
  • A “bad bank” or a “non-essential unit” is created to hold businesses such as emerging markets investment banking business until they can be sold or written off.
  • A new boutique investment bank, CS First Boston, is created to compete with Jefferies, Lazard or Evercore. The hope is to sell CSFB for billions of dollars to outside investors.
  • The remaining Credit Suisse will include the global wealth management businesses, Swiss retail banking and existing trading businesses.

By the numbers: If dissolution causes the bank to trade even half of its book value, it would still mean the stock price more than doubles.

  • The real hope is that both CS First Boston and Credit Suisse will be worth more than Credit Suisse is worth today. This is a classic sum-of-the-parts move, which generally only makes sense when a company’s stock price is extremely depressed.

To note : The plan’s architect is Michael Klein, who as part of his job was to find a CEO to run CS First Boston. Echoing Dick Cheney, he chose… himself.