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Billionaire Lu Zhengyao was the ideal client for former Credit Suisse chief Tidjane Thiam to expand to China. Now Lu’s coffee chain empire has become the target of the raids, and the big bank is facing credit defaults.
Tidjane Thiam, the former CEO of Credit Suisse (CS) had big plans in Asia, and Lu Zhengyao he was her “poster customer,” as she liked to explain in public. He met the founder of the coffee chain Luckin Coffee, the Chinese counterpart of the American supplier Starbuck, countless times in Beijing, Thiam reported at a conference. The billionaire is a “dream customer” for the institute.
In fact, the leading Swiss bank and the Chinese billionaire have for years established close ties between private banking and investment bank CS. This corresponds to the claim of the self-proclaimed “entrepreneurial bank”, which wants to serve business owners with a wide range of services.
Imaginary sales reserved
The closeness is now taking its toll: Luckin Coffee is involved in a major fraud scandal, and participation in the group threatens to become a serious cost to the CS, as reported by the agency “Bloomberg”.
Lu does not appear to be involved in fraud in his own company. But that doesn’t help him and his business partners much now: The individual managers had been tricking the books and posting imaginary sales of $ 310 million. That corresponds to almost 40 percent of annual sales.
Meanwhile, two Chinese regulators have raided Luckin Coffee to get to the bottom of the machinations. At the Nasdaq U.S. tech swap, where the company made a striking debut last year, the stock was only a tenth of its value earlier in the year. Trade was suspended in early April.
Provisions for default of quintupled loans
Although western banks like Morgan Stanley and Barclays Luckin Coffee also wooed, the deep fall has particularly painful consequences for the CS. Provisions for loan defaults in the Asia-Pacific region have quintupled for the bank, as quarterly figures show. According to the agency, most of these failures are attributable to Lu and his company. According to media reports, this also includes Lombard loans to the billionaire personally covered by Luckin’s shares of around $ 100 million.
CS was also the leading bank for last year’s IPO in New York and orchestrated several hundred million dollars for Luckin Coffee bonds. According to the report, the Swiss are now not allowed to accompany the $ 500 million IPO from health startup Wedoctor in Hong Kong. The bank has launched internal investigations into the case, which apparently also deal with business practices with Chinese corporate clients.
Thomas Gottstein searches for the pieces
Thiam, once so enthusiastic, no longer wanted to comment on the matter with “Bloomberg.” Last February, he left CS as part of the internal “Spygate” scandal. His successor Thomas Gottstein Now find the pieces. As he told the agency, it was too early to decide on the matter. In any case, the strategy in Asia, a legacy of the predecessor Thiam, will continue.
