This man has to reinvent Credit Suisse

The backlog of catastrophic missteps and foreseeable billions of dollars at Credit Suisse allow only one conclusion: With the change in the executive committee, a radically different strategy must be found for the big bank.

The current situation at Credit Suisse (CS) is precarious: the board of directors, the management and crisis committees have to fight two fires with potential damages worth billions of dollars, look for the causes and the culprits of the events and disastrous effects, and reassure investors. , regulators and employees.

But with the damage limitation, there is still no clarity on the scope, it is not enough for CS. The debacle surrounding the Greensill funds is a slap in the face to the clients of asset management and private banking. The awkward handling of the margin call at Archegos Capital Management raises questions about the capabilities within CS-Investmentbank.

The obviously overwhelmed risk management of the second largest Swiss bank has become a problem for rating agencies and regulators.

CEO change is useless

Bottom line: CS’s reputation has suffered enormous damage, likely to lead to cash outflows, hinder new business, increase frustration among employees, and keep talented new staff away from the bank.

The “Tollhaus am Paradeplatz”, as finews.ch Recently titled in an article in light of the Greensill fiasco’s handling, the missteps that have come to light in the last twelve months – Luckin Coffee, Wirecard, Softbank, York Capital, Greensill, Archegos – are due to a change in CEO o However, several manager exits, as well as some tinkering in risk management and investment banking, cannot be resolved.

Strong warning from the National Bank

If the phrase also applies to CS, that fish stinks from the head, it is the intended departure of the Chairman of the Board. Urs Rohner just the beginning of next month.

The 61-year-old lawyer will be left with the attribute of being responsible for a lost decade of the once proud CS. The strategy below Brady dougan It was already out of date after the financial crisis. But Rohner and the weak board of directors let the American investment banker stand his ground until chronic capital shortages broke out at the Swiss National Bank (SNB).

Master strategist Tidjane Thiam?

Tidjane thiamOnce celebrated as a master strategy by the industry magazine “Euromoney”, it did nothing more than give the CS a new divisional structure, radically reduce costs and reduce the size of the large investment bank. After all, Thiam managed to raise almost CHF 10 billion in fresh capital from CS shareholders in 18 months.

But his strategy of being an asset manager with a “strong investment bank”, as Thiam did, must also be set aside.

The conclusion after ten years with Rohner as CS leader and five years after the alleged change in strategy is very sobering: the share price is more than 70 percent lower than in 2011. Rohner’s full promise in 2018 that CS will now be shareholder-friendly after the dividend that had previously consisted of newly issued shares for years is taking a hit.

Ghost of the capital increase

Analysts assume that CS will have to halt its announced share buyback program of more than 1.5 billion francs. The expected loss of billions of dollars from the Greensill and Archegos debacle seriously calls into question the payment of dividends for 2021. CS’s equity ratio threatens to fall below the 12.5 percent mark – the specter of a new capital increase is already circulating.

To the new president who will take office at the end of April Antonio Horta-Osorio – currently still CEO of British Lloyds Bank – is not waiting for a CS as a restructuring case. Rather, the Portuguese must literally reinvent the second largest Swiss bank.

Cloudy beginning of “a bank”

It has been very clearly demonstrated that CS’s current strategy does not add any added value: the Greensill case has shown the limits of the murky principle of “One Bank” serving large individual investment bank and asset management clients. The investment bank alone is too light to be competitive. Wealth and asset management is not critical in size.

In this sense, the SC must undergo a fundamental transformation and a change of culture. Only then can it remain relevant in its target markets in the face of rapid technological change in the financial world in the coming years.

It would be difficult to understand if CS’s major shareholders did not insist on a more radical change in strategy.

Main shareholders with sober arithmetic

Horta-Osorio will have to face the main problem that the CS simply lacks the means to participate in the technological arms race led by the US banks. This restriction will lead to a strategic focus on fewer business areas, or to partial sales. The right course in asset management is already being set. The other divisions, starting with the investment bank, will also be examined.

Horta-Osorio and the big shareholders of sober arithmetic could even conclude that CS’s break-up with a spin-off of the healthy Swiss bank (SUB) could bring the most added value, and that shareholders have waited in vain so far. .