Credit Suisse: from Kreditanstalt to Credit Suisse Group

First Boston and the holding structure

The Kreditanstalt was the first of the Swiss big banks to commit itself to American investment banking. In 1978 it formed a joint venture with the New York investment bank First Boston, based in London and known as Financière Crédit Suisse–First Boston, after Merrill Lynch had acquired White Weld, the Kreditanstalt’s earlier partner.¹ The joint venture became one of the leading houses on the Euromarkets, which are described in Part F of this book. In 1988 the relationship was reorganised. Credit Suisse acquired a stake of 44.5 per cent in First Boston, which was taken private and combined with the joint venture in a new entity, CS First Boston. When the market for high-yield bonds collapsed in 1989, First Boston incurred heavy losses on bridge loans, most notoriously on the leveraged buyout of the Ohio Mattress Company. Credit Suisse rescued the firm and acquired a controlling stake in 1990.²

The rescue of First Boston was a decisive moment. It brought the Kreditanstalt into control of a Wall Street investment bank with a culture, a remuneration system and a risk appetite very different from those of a Swiss universal bank. It also committed the Zurich bank to the American market at a time when its Swiss competitors were still hesitant. Swiss radio and television later described the takeover as a rescue operation of an order unprecedented for a Swiss firm.³ In retrospect the Neue Zürcher Zeitung, in its obituary of Rainer Gut in October 2023, called him the inventor of the modern Credit Suisse.⁴ The judgment captures a tension that would accompany the bank until its end.

To manage an organisation that now comprised a Swiss universal bank, an American investment bank and several other companies, the Kreditanstalt created a holding structure. Early in 1989 a new publicly traded holding company, CS Holding, was established. Under it were placed the Kreditanstalt as the full-service bank in Switzerland, CS First Boston, the trust and consulting group Fides and the electricity and engineering holding Electrowatt. The Historical Dictionary also lists CS Life among the companies of the holding.⁵ The holding structure was a novelty in Swiss banking. It separated the ownership of the group from the operating bank and allowed the management to buy, sell and combine businesses without changing the legal identity of the Kreditanstalt. It was the instrument of the acquisitions that followed.

Bank Leu (1990)

The first of these acquisitions was Bank Leu. The oldest of the Swiss big banks had experienced setbacks and received several takeover offers in the late 1980s. In 1990 it was bought by CS Holding. One company history describes the transaction, completed in April 1990, as the first hostile takeover in Swiss banking.⁶ After the acquisition Bank Leu concentrated on wealth management and on universal banking in the Zurich region. From 1998 it operated as a legally independent private bank within the group, focused on investment business for private clients. In 2007 it was merged with other subsidiaries into the private bank Clariden Leu, which was absorbed by Credit Suisse in 2012.⁷

The acquisition of Bank Leu preserved a Zurich banking name for another two decades, but it ended the independence of an institution that had been part of the city’s financial history since the eighteenth century. Its significance lay in the precedent it set. A big bank had shown that it was prepared to take over a smaller one even against the resistance of the target, using a holding structure that made such a transaction legally and financially manageable.

The Schweizerische Volksbank (1993)

The takeover of the Schweizerische Volksbank in 1993 was the largest domestic transaction of the early 1990s and a direct consequence of the real-estate crisis. The provisions that the Volksbank had to make on property loans consumed its substance to a point where it could not bear them alone. Having earned profits of more than CHF 100 million a year between 1986 and 1990, the bank had moved into a loss of CHF 68 million. In the middle of 1992 it announced the reduction of 500 jobs. On 6 January 1993 the Kreditanstalt announced that it would take over the Volksbank, then the fourth-largest bank in the country with about 6,100 employees in Switzerland. The price was CHF 2.6 billion. The Union Bank of Switzerland had also bid for the Volksbank and lost in the final stage. The president of the National Bank, Markus Lusser, called the transaction probably the most important step in the ongoing structural consolidation of Swiss banking.⁸

The contest between the two Zurich banks for the Volksbank has become part of the folklore of the Paradeplatz. The financial news portal finews.ch described it as a merciless and cleverly fought takeover battle in which the Kreditanstalt outmanoeuvred the Bankgesellschaft, although the latter appeared to have the better connections to the target’s leadership.⁹ Within three years of the takeover more than 2,000 jobs had been eliminated.¹⁰ The Volksbank brand survived for a few years before it disappeared in the reorganisation of the group. For the Kreditanstalt the acquisition meant a large branch network, a strong base in the Swiss retail and small business market and a position as the country’s second-largest bank. It also gave the group the domestic weight that it needed to balance its American investment banking business.

The reorganisation of 1996–1997

By the middle of the 1990s CS Holding was a conglomerate of banks and other companies with overlapping activities. In 1996 the management began a comprehensive restructuring. CS Holding was renamed Credit Suisse Group and reorganised into business units that were defined by client segments and functions, with a clear focus on international activities. The name Credit Suisse Group was used from January 1997.¹¹ The Kreditanstalt as a separate legal and commercial identity disappeared. Its Swiss business was continued under the name Credit Suisse, its private banking activities were concentrated in a separate unit and its investment banking was carried on by Credit Suisse First Boston.

On 1 January 1997 Lukas Mühlemann became chief executive of the newly formed group. A former McKinsey executive, he had been recruited to Swiss Re before he moved to Credit Suisse.¹² His appointment marked a generational change in the style of leadership. Gut had built the group through personal relations and strategic intuition. Mühlemann brought the language of management consultancy, of shareholder value and of portfolio strategy. Both men shared the conviction that a Swiss bank had to become a global player in all main areas of finance to remain independent.

Winterthur and the idea of bancassurance

The most ambitious expression of this conviction was the acquisition of the Winterthur insurance group in 1997. Since the late 1980s the idea of Allfinanz, the combination of banking and insurance under one roof, had been fashionable in Europe. Its advocates argued that a group combining both could sell insurance through bank branches, use the stable premium income of insurers to fund banking activities and offer clients a single point of contact for their savings, pensions and risk protection. In Switzerland the idea found its most prominent realisation in the combination of the Kreditanstalt and Winterthur.¹³

The immediate background of the transaction was a contest for control. Martin Ebner, the Zurich financier whose role in the affairs of the Bankgesellschaft is examined below, had built up a significant position in Winterthur. The internal decision for a capital link between Credit Suisse and Winterthur was taken in mid-June 1997 under the code name “Albani”. On 10 July 1997 Ebner publicly disclosed that he was a co-owner of the insurer, and on 11 August 1997 Credit Suisse Group announced the de facto takeover of Winterthur at a hastily arranged press conference.¹⁴ Blick later described the transaction as designed, among other things, to prevent Ebner from gaining control of the insurer. The group first combined with Winterthur in August 1997 and bought the company outright in November. One company history gives the value of the transaction as about USD 9.5 billion.¹⁵

With Winterthur, Credit Suisse Group became a financial conglomerate of a kind that Switzerland had not seen before. In 2000 the group employed about 80,000 people worldwide, 28,000 of them in Switzerland.¹⁶ The Historical Dictionary summarises the outcome of the bancassurance experiment in a single sentence: the strategy failed, and after partly costly failures the businesses were separated again.¹⁷ Credit Suisse decided in 2004 to leave the insurance business. On 19 June 2006 it agreed to sell Winterthur to the French insurer AXA for CHF 12.3 billion in cash. The chief executive at the time, Oswald Grübel, explained that the group would concentrate on organic growth and selective acquisitions in investment banking, private banking and asset management.¹⁸ The history of the insurance sector in Zurich and Winterthur, including the later fate of the Winterthur under AXA, is treated in Part E of this book.

The bancassurance episode contains a lesson that reaches beyond Credit Suisse. The combination of banking and insurance multiplied the complexity of the group, subjected it to two regimes of supervision and linked the capital of the insurer to the volatility of the investment bank. When equity markets fell after 2000, the insurer’s investment portfolio and the investment bank’s trading book suffered at the same time. The theoretical diversification of the conglomerate turned out to be a correlation of risks in a crisis. The Swiss supervisory authorities, which were then still divided between the Federal Banking Commission and the Federal Office of Private Insurance, faced a structure that neither of them could oversee as a whole. Since 2009 a single authority, FINMA, has supervised banks and insurers alike.

Notes

1. Reference for Business, “Credit Suisse Group – Company Profile, Information, Business Description, History”, https://www.referenceforbusiness.com/history2/51/Credit-Suisse-Group.html. ↩
2. Wikipedia, “Credit Suisse First Boston”, https://en.wikipedia.org/wiki/Credit_Suisse_First_Boston (used for the sequence of ownership changes). ↩
3. SRF News, “167 Jahre Credit Suisse: Das Ende einer Traditionsbank”, https://www.srf.ch/news/wirtschaft/cs-uebernahme-durch-die-ubs-167-jahre-credit-suisse-das-ende-einer-traditionsbank. ↩
4. Pierre Weill, “Der Erfinder der modernen Credit Suisse”, Neue Zürcher Zeitung, 14 October 2023, p. 35, https://www.nzz.ch/wirtschaft/nachruf-rainer-e-gut-der-manager-der-die-credit-suisse-gross-machte-ld.1731609 (paywall), bibliographic details as given in Wikipedia, “Rainer E. Gut”, https://de.wikipedia.org/wiki/Rainer_E._Gut, which also gives 11 October 2023 as the date of his death. ↩
5. Reference for Business, “Credit Suisse Group”, as cited above; HLS, “Crédit suisse”, as cited above. ↩
6. Reference for Business, “Credit Suisse Group”, as cited above. The characterisation as “hostile” comes from this secondary source and should be read with caution. ↩
7. HLS, “Bank Leu”, as cited above. ↩
8. HLS, “Schweizerische Volksbank (SVB)”, as cited above; SWI swissinfo.ch, “SKA übernahm vor 25 Jahren die angeschlagene Volksbank”, 2018, https://www.swissinfo.ch/ger/ska-uebernahm-vor-25-jahren-die-angeschlagene-volksbank/43802724. Other sources give different figures for the price; one company history mentions CHF 1.6 billion. ↩
9. finews.ch, “Wie die SKA die UBS einst über den Tisch zog”, https://www.finews.ch/news/banken/30214-ska-kreditanstalt-rainer-e-gut-volksbank-ubs-sbg-bankgesellschaft-bern-zuerich. ↩
10. SWI swissinfo.ch, “SKA übernahm vor 25 Jahren die angeschlagene Volksbank”, as cited above. ↩
11. Reference for Business, “Credit Suisse Group”, as cited above; HLS, “Credit Suisse Group”, https://hls-dhs-dss.ch/fr/articles/045043/2004-03-16/. ↩
12. Blick, “Aufstieg und Fall des Lukas Mühlemann”, https://www.blick.ch/news/aufstieg-und-fall-des-lukas-muehlemann-id131377.html. ↩
13. HLS, “Versicherungen”, section on the late twentieth century, https://hls-dhs-dss.ch/de/articles/014066/. ↩
14. Bilanz, “Martin Ebner – BK Vision”, https://bilanz.ch/people/martin-ebner-bk-vision. ↩
15. Blick, “Aufstieg und Fall des Lukas Mühlemann”, as cited above; HLS, “Credit Suisse Group”, as cited above; Reference for Business, “Credit Suisse Group”, as cited above. ↩
16. HLS, “Credit Suisse Group”, as cited above. ↩
17. HLS, “Versicherungen”, as cited above. ↩
18. Versicherungsmagazin, “Credit Suisse verkauft Winterthur an Axa”, https://www.versicherungsmagazin.de/themen/branche/credit-suisse-verkauft-winterthur-an-axa-1882351.html. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.