Monday, May 16

The turbulence in Credit Suisse continues after the resignation of Horta-Osorio


Credit Suisse will press ahead with its strategic review despite the abrupt departure of its chairman, Antonio Horta-Osorio. An internal investigation into his personal conduct has uncovered breaches of rules over Covid-19, the bank’s new chairman confirmed on Monday.

Horta-Osorio is leaving less than nine months after joining the bank to deal with the implosion of investment firm Archegos and the insolvency of UK finance company Greensill Capital. It is still suffering the impact of the departure in 2020 of the executive president, Tidjane Thiamfor an espionage scandal.

The Portuguese banker presented in November a new strategy for Switzerland’s second-largest bank, focused on wealth management, reining in its investment bankers and curbing an independent culture.

“Horta-Osorio’s resignation leaves Credit Suisse with an evident lack of leadership”

Citigroup

“In the coming years, the strategy will be reviewed regularly, but at the moment it is not a problem at all,” Axel Lehmann, the Credit Suisse board member chosen to replace Horta-Osorio, said in an interview with Reuters, the first with the media since his appointment.

The bank’s shares fell about 1.6 percent in trading on Monday.

Horta-Osorio’s personal conduct has come under scrutiny. He breached Covid-19 quarantine rules twice in 2021, an embarrassment for the former Lloyds chief executive, who has said all bankers should be risk managers.

“I am sorry that several of my personal actions have caused difficulties for the bank and have compromised my ability to represent the bank internally and externally,” Horta-Osorio said in a statement issued by Credit Suisse on Monday.

“Therefore, I believe that my resignation is in the interest of the bank and its shareholders at this crucial moment,” he concluded.

Credit Suisse confirmed that Lehmann had taken over the responsibilities as chairman with immediate effect. He did not elaborate on an investigation commissioned by his council into Horta-Osorio.

Two people familiar with the situation said that in addition to the Covid-19 violations, the investigation also looked into Horta-Osorio’s use of the company’s private planes, citing a case in which he ordered to be flown to the Maldives. on his return from a business trip to Asia.

Horta-Osorio’s spokesman declined to speak to the media.

His departure marks a career low point for the banker, who spent a decade at Lloyds rebuilding the bank after its rescue during the 2008 financial crisis. Last summer he was knighted in Britain for his contribution to financial services and mental health.

He was praised for publicly recounting the stress he experienced after assuming the chairmanship of Lloyds.

“(Horta-Osorio) was a very important reason to invest in Credit Suisse. And if that person leaves, that very important reason also leaves”

David Herro, Portfolio Manager at Harris Associates

Lehmann, a Swiss citizen who previously worked for Credit Suisse rival UBS and spent nearly two decades at Zurich Insurance, said no change of course was planned in a bid to return to calmer waters.

He confirmed that business remained excellent despite the latest controversy and that no major management changes were in the works. He added that Chief Executive Thomas Gottstein was “central to our ability to continue the transformation together.”

He did explain that Credit Suisse’s board of directors concluded over the weekend that it was time for Horta-Osorio to leave.

“We decided over the weekend, and he thought so too, that the best thing for him, but certainly also for the bank, is to put this story behind us and for him to resign.”

two strikes

Analysts say Horta-Osorio’s departure was inevitable after he was found to have breached lockdowns twice, but could further complicate the bank’s recovery.

“His departure leaves Credit Suisse with a lack of strong management and questions about the bank’s leadership are likely to be raised,” Citigroup analysts wrote.

In December, Reuters reported that a preliminary internal investigation had found that Horta-Osorio attended the Wimbledon tennis finals in London in July without following Britain’s quarantine rules.

Horta-Osorio also broke Swiss rules on Covid-19 in November by leaving the country for a 10-day quarantine period, the bank said last month.

The pandemic brought heightened scrutiny of prominent figures, with athletes like the tennis superstar Novak Djokovic and politicians like the British Prime Minister, Boris Johnson, drawing criticism for his actions at a time when the public has to live with Covid-19 restrictions.

Investors had hoped the bank’s strategic changes would help lift the Swiss bank’s share price.

David Herro, a portfolio manager at Harris Associates, Credit Suisse’s third-largest shareholder, told Reuters ahead of Horta-Osorio’s resignation that he believed the breaches were “minor” and that he and his restructuring plan had the full backing. of the institution.

“So that’s a very important reason to invest in the company. And if that person (Horta-Osorio) leaves, that very important reason also leaves”.

What a waste!

Recovering from a disastrous year, Credit Suisse reported a 21 percent drop in third-quarter profit last year and warned of a loss for the final three months of 2021.

However, UBS, Switzerland’s largest bank, reported its highest quarterly profit in six years in the third quarter.

While Credit Suisse shares have lost 23 percent over the past year, those of its rival have soared 33 percent to a four-year high.

Horta-Osorio’s sudden departure demoralized Credit Suisse staff, with some questioning what’s next for the bank.

“What a waste and we’re making headlines again for the wrong reason,” a Credit Suisse senior private banker said on condition of anonymity as he was not allowed to speak to the media.

“We froze for a year waiting for the new president’s new strategy,” he concluded. ● An article by Anshuman Dagger and Oliver Hirt; edited for Reuters by Tomasz Janowski; edited in Spanish for Finanzas.com by Ismael García



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