Analysis: Credit Suisse looking for a new card after getting lost with Archegos
© Reuters. FILE PHOTO: The logo of the Swiss bank Credit Suisse can be seen in Bern
By Brenna Hughes Neghaiwi and Oliver Hirt
ZURICH (Reuters) – Thomas Gottstein may have acted decisively enough this week to stay that way Swiss credit (SIX 🙂 Chief Executive, but investors may need more radical action after the bank lost $ 4.7 billion to the Archegos hedge fund scandal.
Credit Suisse stocks are down 25% in a month, with Switzerland’s second largest bank being hit by its exposure to the collapse of first Greensill Capital and then Archegos Capital Management.
This toxic mixture presented the 57-year-old Swiss Gottstein with the daunting task of limiting the longer-term damage to the bank’s reputation and retaining both customers and employees.
“It is very disappointing what has happened in the last few months – it is far below the expected standard,” a Credit Suisse bond investor told Reuters.
Gottstein’s hands will be tied, however, until António Horta-Osório, who is known as AHO to some employees of Britain’s Lloyds (LON :), where he is CEO, is appointed chairman, analysts and investors said, adding the deeper one Effect is still pending to be felt.
“The full consequences of the loss of reputation will only become visible over time,” said Andreas Venditti, an analyst at Zürcher Kantonalbank, about the latest events.
Credit Suisse said Tuesday that it would charge a fee of CHF 4.4 billion ($ 4.71 billion) after Archegos “failed to meet” its margin commitments.
The charge, which was nearly three times the investment bank’s profit last year, far exceeds the $ 2.3 billion loss to rogue dealers at rival UBS in 2011.
Swiss banks have not been afraid of ditching their CEOs if things don’t go according to plan. The rogue dealer affair triggered the departure of Oswald Grubel from UBS, while Gottstein’s predecessor Tidjane Thiam was ousted due to a spy scandal.
Gottstein, a former investment banker and asset manager who took over the helm just a year ago, reacted quickly and replaced the head of the investment bank and the bank’s chief risk officer.
This followed his announcement that Credit Suisse’s wealth management unit would be divested of its wealth business after it was forced to close down $ 10 billion in funds that invested solely in bonds issued by Greensill.
WAITING FOR AHO
Investors expect larger changes to be difficult to make once two external investigations at Archegos and Greensill and the change of chairperson are completed.
Urs Rohner, who has been with the bank since 2011, will be leaving Credit Suisse at the end of April. The retail banking specialist Horta-Osório will be elected at the upcoming Annual General Meeting.
“We hope that the change of chairman scheduled for the next AGM will allow a new corporate culture to be established with a more focused approach to risk management,” said Ethos, a company that advises shareholders on voting at general meetings.
Ethos has requested that the two investigations review the accountability of the board and that the results be published.
A source close to Credit Suisse said that without the planned change in chairperson, the bank may have already initiated significant structural changes.
Meanwhile, Credit Suisse has combed exposure to its brokerage prime services, another source said, and a more thorough review is expected to reduce risk within the entity and its broader investment bank.
The more immediate concern is whether customers and some of their top employees will migrate after the recent scandals.
A headhunter in Hong Kong said he had received several inquiries from Credit Suisse market operations employees who were planning to leave after the Archegos scandal.
The chairman of an asset management boutique in Monaco said he saw an opportunity to attract some of Credit Suisse’s top private bankers.
“This is a great opportunity for someone like us as a boutique and other competitors of Credit Suisse to gain more market share in the ultra-high-value asset segment,” added the manager, who refused to be named.
Credit Suisse declined to comment on a possible loss of personnel.
Christian Meissner, who will take over the management of the investment bank after Chin’s exit, has been hired to retain talent and attract business in areas where Credit Suisse is doing well, such as the listing of Special Purpose Acquisition Companies (SPACs), a source near the Austrian banker said.
“The mood among bankers is bad, but people are not going to quit yet. They would have to find new jobs first. This gives Meissner time to show that they are still competitive and can win mandates,” the source said.
Gottstein told Swiss newspaper NZZ on Tuesday that he still believes in the “one bank” model, where departments work together to serve wealthy clients, and that it “improves” risk management.
If he sticks to the model, he’ll have to find a path to profitability while keeping risk much more tightly under control.
“They’ve lost profits and won’t get them back until they find another path,” said Jason Teh, chief investment officer at Vertum Asset Management in Sydney.
($ 1 = 0.9336 Swiss Francs)