In a surprise shake-up, Zurich-based Credit Suisse Group said Thursday that co-chief executive John J. Mack, who helped return the firm's U.S. investment banking arm to profitability after two dismal years, will step down when his contract expires in July.
The company said Oswald J. Grubel would become sole chief executive of Credit Suisse Group as of July 13. Brady W. Dougan, 44, will replace Mack as chief executive of the firm's U.S. banking unit, Credit Suisse First Boston.
Dougan heads CSFB's institutional securities department and is viewed as a close ally of Grubel's. Some analysts said Dougan's ascension indicates Grubel won a power struggle with Mack for control of the firm.
Mack's departure surprised Wall Street, coming just weeks after he told a magazine that he had no plans to leave. Mack, a major fundraiser and contributor to President Bush's reelection effort, was responding to rumors that he planned to leave CSFB for a job in the administration.
"The answer is no, I am not leaving," he told Euromoney magazine in its June 1 edition. "If I did, what would I do? In 2001, I didn't work for four months, and I only got my golf handicap down by one stroke. I like what I'm doing, and there's more to be done."
Mack did not return a call for comment. In a prepared statement, Credit Suisse Group Chairman Walter B. Kielholz praised Mack for leading "a dramatic turnaround of CSFB -- delivering a $1.4 billion profit last year, enhancing its reputation by resolving major regulatory challenges and strengthening the franchise in key areas for future growth."
Mack, who previously lost out in a struggle with Philip J. Purcell to head investment bank Morgan Stanley, joined CSFB in July 2001 and immediately began trimming a staff bloated by the firm's $13 billion acquisition of Donaldson, Lufkin & Jenrette.
Mack succeeded at that task, cutting CSFB's staff by a third during his tenure. After losing $1.2 billion in 2002, CSFB rebounded and earned a net profit of $607 million in the first quarter of 2004, a 39 percent increase over the same period in 2003.
But Mack also inherited a firm badly foundering in the wake of the technology and telecommunications stock bubble implosion. CSFB, whose Silicon Valley-based technology investment banking unit was among the leaders in bringing Internet start-ups public during the boom, found itself in the midst of multiple regulatory inquiries when the bubble burst in 2000.
CSFB's star technology banker, Frank P. Quattrone, was convicted last month of obstructing two federal probes into the way his firm handed out hot new stocks. Mack negotiated the firm's way through the multiple probes but was not able to restore CSFB's rankings in Wall Street's all-important "league tables," which measure fees that firms generate from stock and bond underwriting, mergers and acquisitions advice, and other services.
CSFB dropped to seventh place from third last year in global fee generation, according to consulting firm Freeman & Co. Several observers said Mack might have fallen victim to that decline.
"The expectation was that he would take CSFB back into the first rank of brokerage firms, and, looking at the league tables, it doesn't seem like he is doing that," said Richard X. Bove, an analyst at brokerage and investment bank Hoefer & Arnett Inc. "So when it came time to renew [Mack's contract], it appears the Swiss are regaining control and will pick their own man" to head CSFB. Bove's firm does no business with CSFB, and he does not own the firm's stock.
Credit Suisse Group appeared to support Bove's assertion in its news release announcing the management changes and a realignment of its business operations. Kielholz said one reason for the shake-up was to "strengthen the competitive positioning of our core banking businesses."