When Credit Suisse reports its third quarter results on Thursday, it won't just be the impact of its investment banker exits that merits scrutiny - it will also be an opportunity to assess the impact of the recent departures of two of its most talented and profitable credit traders.
30 year-old Hamza Lemssouguer left Credit Suisse in September 2020. Even though he was only at the bank for nine months of the year, Bloomberg reported that Lemssouguer's high-yield desk generated about $220m,or 5.5% of the bank's entire fixed income trading revenues for 2020. Credit Suisse insiders say this amount was in fact generated by Lemssouguer alone: without him, the implication is that the bank's fixed income trading revenues could be down at least 5% this year.
Lemssouguer is not the only major exit from Credit Suisse's trading team. Earlier this month, the bank also lost David Goldenberg, its head of U.S. credit derivatives trading. We understand that Goldenberg generated well over $220m in PnL for 2020 as a whole.
In losing these two traders, therefore, Credit Suisse may have lost over 10% of its future fixed income trading revenues, which totaled $4bn last year. This could inflict a double blow at a time when most banks are already suffering double-digit percentage drops in fixed income trading, and when Credit Suisse's traders need to demonstrate the viability of the business ahead of the new chairman's review of all business lines, which is due later this year. Swiss rival UBS, for example, reported a nearly 50% year-on-year drop in its fixed income sales and trading revenues in the second quarter.
Could Credit Suisse's fall be even worse? Goldenberg and Hamza may have been the bank's best traders, but they're not the only ones to have quit: HSBC also hired four corporate bond traders, including managing director Chris Bathon, from Credit Suisse in June.
Credit Suisse declined to comment on the potential impact of its trading exits. However, traders' performance today is increasingly attributed to the strength of the franchise rather than the strength of the individual, and that this could protect the bank against Lemssouguer and Goldenberg's absence. Equally, though, the two men appear to have been significant individual performers in very different markets: Lemssouguer was making a fortune with positional trades on events in the high yield market; Goldenberg - who is one of the most profitable index traders in the whole market - was making money from flow. Goldenberg's team remains at CS, but we understand that he accounted for the vast majority of their profits.
Neither of Credit Suisse's former top traders are back in action elsewhere yet. When his gardening leave is over, Goldenberg will be joining Barclays, which is busy benefitting from Credit Suisse's fallout. Lemssouguer is setting up his own hedge fund.
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