Credit Suisse Looks to Rainmaker to Revive Investment Bank

Michael Klein

has been a matchmaker to some of the world’s most powerful companies and investors since leaving

Citigroup Inc.

more than a decade ago.

Now, he has found his own match—as soon-to-be chief executive of

Credit Suisse

CS 2.74%

Group AG’s newly incarnated investment banking unit, CS First Boston—in a third act that enables him to become a major Wall Street CEO.

Credit Suisse said on Thursday it would separate CS First Boston as part of a survival plan involving the sale of $4 billion in new stock and 9,000 job cuts. Outside investors and employees could eventually own most of the unit, executives said.

The surprise appointment of Mr. Klein, 58 years old, came about after he led a review of Credit Suisse’s investment bank this summer as chairman of a board-led strategy committee.

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In his new role, Mr. Klein, who missed out on the top job at

Citi,

will be able to draw on Credit Suisse’s $707 billion balance sheet to beef up the firm’s once-formidable operations in stock and bond underwriting and deal advice. The aim is to revive the investment bank’s brand and spirit from the boom times in the 1980s, when Mr. Klein was starting out at First Boston rival Salomon Brothers.

Fans of the banker said Mr. Klein’s ambition, relationships and instincts should give the new unit momentum and a leader to rally around. Poor morale after financial and reputational scandals caused many Credit Suisse bankers to leave. For years, bankers—including some who joined from First Boston and Donaldson, Lufkin & Jenrette, another Credit Suisse acquisition—complained about not having enough autonomy.

“Where others see uncertainty and dislocation, Michael sees clarity and opportunity,” said

Raymond McGuire,

whom Mr. Klein recruited to Citigroup in 2005 and later served as the bank’s vice chairman before an unsuccessful run for New York City mayor last year.

Others question the optics of installing Mr. Klein to run a business he was instrumental in establishing, given the potential for conflict-of-interest.

Credit Suisse Chairman

Axel Lehmann

said Mr. Klein didn’t vote on plans, but could only “contribute from a more technical perspective, helping to create the fact base for decision-making.”

Mr. Klein’s advisory boutique, M. Klein & Co., will be folded into the new CS First Boston, a person familiar with the matter said. Credit Suisse declined to comment and Mr. Klein declined to be interviewed. The move coincides with a cooling off in some of the banker’s other business interests, such as launching special-purpose acquisition companies. Mr. Klein became a face of the recent SPAC craze, with mixed success.

In 2018, Credit Suisse’s then-Chairman

Urs Rohner

helped recruit Mr. Klein to its board, to add investment-banking clout and tap his experience in the U.S. and the Middle East, where the Swiss bank manages the wealth of some of the region’s richest families.

Mr. Klein’s involvement stepped up a notch when Credit Suisse lost more than $5 billion from the collapse of Archegos Capital Management in March 2021. Credit Suisse sought to fix internal problems and began scaling back, leading to Thursday’s decision to separate CS First Boston.

As the plan took shape, Mr. Klein was seen by other board members as the obvious candidate to run the business, a person familiar with their views said.

Credit Suisse CEO

Ulrich Korner

said the independent unit could have a higher value under different owners or through a stock-market listing, with Credit Suisse keeping a minority stake.

Mr. Klein learned his trade at Salomon Brothers, joining after college when the firm was in its 1980s zenith. He scaled the ranks as the firm merged with what would become Citigroup, pushing it into corporate advice and snagging fees off competitors.

He wanted to be Citigroup CEO, people who know him said, but left in summer 2008 after the bank chose

Vikram Pandit

and as Wall Street sank into crisis mode.

When Mr. Klein left,

Dow Chemical Co.

was working on an acquisition and wanted his help. Then-Dow CEO

Andrew Liveris,

a Citigroup board member, got Mr. Pandit to waive a noncompete agreement. Mr. Klein’s boutique helped Dow on its $120 billion merger pact with

DuPont Co.

in 2015, underlining a flair for repeat business.

Mr. Pandit got a similar call in September 2008.

Bob Diamond,

then president of

Barclays

PLC, needed Mr. Klein’s help to buy much of Lehman Brothers’ U.S. business from bankruptcy, a coup for the British bank that earned Mr. Klein $10 million.

“He’s probably the hardest-working person I know on Wall Street,” said

Howard Ungerleider,

now Dow’s president and finance chief.

People who worked with Mr. Klein said he is well-mannered, unlike some bankers of his generation, often sending personal thank-you notes.

Mr. Klein’s star rose through work in Saudi Arabia, including on the 2011 joint venture between Saudi Aramco, officially named Saudi Arabian Oil Co., and Dow.

Khalid al-Falih,

then president and CEO of Aramco, was impressed, and asked him for help preparing its colossal initial public offering in 2019, according to Saudi officials familiar with the matter.

At one perilous juncture, when banks told the Saudis they weren’t going to get a sought-after $2 trillion valuation, Mr. Klein brainstormed with bankers on fresh marketing angles and immersed himself in the nitty-gritty, such as preparing slides, a person familiar with the deal said.

Mr. Liveris said that in a large arbitration case, Mr. Klein persuaded the other party to send over some money quickly as a show of good faith. “It was a little bit cheeky” of him to ask, Mr. Liveris said, praising Mr. Klein’s negotiating skills and work on both the arbitration and the Dow-DuPont merger.

Mr. McGuire, himself a First Boston alumnus, said Mr. Klein will have considered all the dimensions of what he is taking on. Credit Suisse’s prospects are still far from clear, and some analysts have said the spinoff could complicate simplification efforts.

“I don’t think Michael Klein does anything without a plan,” Mr. McGuire said.

Write to Margot Patrick at margot.patrick@wsj.com, Julie Steinberg at julie.steinberg@wsj.com and Justin Baer at justin.baer@wsj.com

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