credit suisse now its really enough

credit suisse now its really enough

The Fallout from Archegos Hedge Fund Scandal Leaves Credit Suisse in Turmoil

ZURICH (Reuters) – Thomas Gottstein has taken decisive action to remain as the President of Credit Suisse. However, investors are likely to demand even more substantial changes after the $4.7 billion loss the bank suffered due to the Archegos hedge fund scandal.

Over the past month, Credit Suisse shares have plummeted by 25%. The bank, Switzerland’s second-largest, has been reeling from its involvement in the collapses of Greensill Capital and Archegos Capital Management.

This situation has put 57-year-old Swiss national Gottstein in the challenging position of trying to minimize the long-term damage to the bank’s reputation while retaining both clients and employees.

According to one investor in Credit Suisse debt, “It’s extremely disappointing what has transpired in the last few months. It’s well below the standard we expected.”

However, Gottstein’s ability to take further action is limited until Antonio Horta-Osorio, known as AHO in his role as CEO of Lloyds Banking Group in the UK, assumes the position of Chairman. Experts and investors believe that the full impact of the crisis is yet to be felt.

Andreas Venditti, an analyst at Vontobel bank, commented, “The complete repercussions of the reputational damage will only become apparent gradually.”

Credit Suisse announced on Tuesday that it would incur a 4.4 billion Swiss franc ($4.71 billion) charge due to Archegos’ failure to meet margin commitments. This charge is nearly three times the investment bank’s profit from last year and far surpasses the $2.3 billion loss from a rogue trader at UBS in 2011.

Swiss banks have not hesitated to remove CEOs when things go awry. The rogue trader incident led to Oswald Grubel’s departure from UBS, and Tidjane Thiam, Gottstein’s predecessor, was ousted following a spying scandal.

Gottstein, a former investment banker and wealth manager who assumed his current role just a year ago, has responded swiftly. He replaced the head of the investment bank and the bank’s risk chief. This was in addition to announcing the separation of Credit Suisse’s asset management unit from its wealth business, after the closure of $10 billion worth of funds invested solely in bonds issued by Greensill.

However, broader changes are expected to face difficulties until the completion of two external investigations into Archegos and Greensill, as well as the appointment of a new Chairman.

According to a source familiar with the matter, “This transition is a guarantee of job security for Thomas Gottstein in the short term.”

Urs Rohner, who has been with the bank since 2011, is scheduled to step down at the end of April. Retail banking expert Horta-Osório is expected to be elected as Chairman at the upcoming annual shareholder meeting.

Ethos, a firm that advises investors on voting at annual general meetings (AGMs), expressed the hope that the change in Chairman would enable the establishment of a new corporate culture with a more focused approach to risk management. It also requested that both investigations examine the board’s accountability and that the results be made public.

The appointment of a new Chairman has created uncertainty for those seeking reassurance during this turbulent time for the bank. “I don’t really know who to turn to,” said one senior advisor. They added, “Gottstein has been compromised, Rohner will be gone soon, and Horta-Osorio hasn’t arrived yet. Everything is in flux, but we need strong leadership now.”

According to a source close to Credit Suisse, the bank would have already implemented significant structural changes if not for the planned Chairman transition.

Meanwhile, Credit Suisse has been reviewing exposures in its brokerage prime services, and a more comprehensive review is expected to result in a reduction of risk within the system and the broader investment bank.

The immediate concern is the potential loss of clients and top employees following the recent scandals. A Hong Kong-based headhunter revealed that several employees in Credit Suisse’s markets division have inquired about leaving in the wake of the Archegos scandal.

The chairman of a wealth management boutique in Monaco sees an opportunity to attract some of Credit Suisse’s top private bankers. “For someone like us, as a boutique, and other competitors of Credit Suisse, it’s a great chance to gain more market share within the ultra-high-net-worth segment,” the wealth manager said.

Credit Suisse declined to comment on the potential loss of personnel.

Christian Meissner, who will oversee the investment bank following Brian Chin’s departure, has been tasked with retaining talent and winning business in areas where Credit Suisse is performing well, such as the provision of special purpose acquisition companies (SPACs), according to a source close to him.

“People won’t resign immediately. They would need to find new jobs first, and this gives Meissner time to demonstrate that they can still be competitive and win mandates,” the source said.

Gottstein, in an interview with Swiss newspaper NZZ, expressed his belief in the “one bank” model, wherein divisions collaborate to serve wealthy clients, stating that it “enhances” risk management. However, if he intends to stick with this model, he will need to chart a path to success while exerting tighter control over risk.

“They have lost earnings, and they won’t recover until they find another way,” said Jason Teh, Chief Investment Officer at Vertum Asset Management in Sydney.

($1 = 0.9336 Swiss francs)

Reporting by Brenna Hughes Neghaiwi and Oliver Hirt; Writing by Rachel Armstrong; Additional reporting by Carolyn Cohn, Pamela Barbaglia, and Simon Jessop in London, John Revill in Zurich, and Sumeet Chatterjee in Hong Kong; Editing by Alexander Smith.