Another Year of "Transition"
The crisis-engulfed Swiss bank began a C-suite sweep which failed to sooth investors. Five suggestions that shareholders still have on their wish-list.
28. April 2022 • Katharina Bart

The Zurich-based bank is struggling to regain the trust of its battered shareholders, who have seen the value of their stock shrink by more than one-third this year alone. Credit Suisse heads into its annual meeting with its shares at an almost all-time low of 6.55 Swiss francs.

The Swiss bank has termed 2022 a transition following two anni horribilus (besides the pandemic, «spygate» and major corporate drama in 2020, then last year Greensill, Archegos, Mozambique, and António Horta-Osório’s ill-fated nine-month star turn). The stakes are high for Axel Lehmann, Credit Suisse’s third chairman in less than nine months. What are his most pressing shareholder priorities?

1 Legal Fight Vs Appease

The exit of Romeo Cerutti as chief lawyer removes one of last vestiges of Urs Rohner, the former chairman who left Credit Suisse in ignominy last year. Rohner orchestrated and oversaw a legal strategy based on fighting back, an approach that backfired several times memorably.

For both men, the entrance of UBS’ Markus Diethelm is a humbling admission of defeat: his approach to cleaning up scandals is antithetical to Rohner’s and Cerutti’s. The 65-year-old Diethelm’s speciality is high-stakes wrangling with U.S. authorities, but Credit Suisse is on the hook with Switzerland’s Finma as well as others for a host of issues including Greensill and Mozambique.

Seasoned but also scarred over his handling of a French criminal probe at UBS, Diethelm needs to signal a radical change in Credit Suisse’s thinking, from pugnacity towards appeasement.

Speaking of vestiges, Lehmann would do well to conduct a similar sweep on the board, where veterans like Sereina Macia, Iris Bohnet, and Michael Klein have observed the bank’s mishaps for years.

2 Visible Figurehead

Lehmann, a cerebral academic-turned-insurance executive, needs to emerge from his shell and take a far more visible role. No strangers to crisis, the bank’s rank-and-file are a loyal bunch – to a point. With CEO Thomas Gottstein visibly hobbled, it falls to Lehmann to rally the troops, as CEO Sergio Ermotti did when appointed CEO of UBS in 2012.

Having Lehmann front and center matters for morale as much as for investor support. The bank is swept clean of stalwarts like Eric Varvel and David Mathers, who were both key in maintaining strong bonds to anchor shareholders like Qatar or the wealthy Olayan clan. Lehmann is likely to have to tap these staunch supporters again in coming months, following an emergency cash call last April.

3 No More Own Goals

Credit Suisse is in the midst of an information maelstrom it can hardly contain or control – the Swiss bank’s ill health and scandals will dominate headlines and chatter for months and years to come. What Credit Suisse can do is stop providing more ammo: shareholders who have lost out have no desire to hear about corporate jets, bonuses, or pricey logo redesigns when existential questions command their attention.

These issues, which would pass without comment at another firm (like UBS or Julius Baer) overshadow the daily efforts of Credit Suisse’s rank and file. The bank does many things well – corporate banking in Switzerland is a standout, for example. Its employees are doing an admirable job of holding it together in the situation. Credit Suisse needs to do more to not further jeopardize this loyalty as competitors circle.

4 CEO: On Borrowed Time

He is the last man standing: CEO Thomas Gottstein is the only Credit Suisse top executive to survive three years of management culls (incuding the one which vaulted him into the job). Nevertheless, the 58-year-old Swiss investment banker is on borrowed time. He stands for Credit Suisse’s historical culture, which has been at the heart of many of its problems and is thus not an ideal person to embody change. Both Greensill and Archegos happened on his watch.

Like Lehmann, Gottstein wouldn’t be in the job if a more talented predecessor (Thiam) hadn’t stumbled and been forced out. Now, more than two years on, Gottstein displays little of the sense of urgency with which Thiam galvanized Credit Suisse and orchestrated a financial turnaround from 2015 to 2018. Gottstein appears ill-equipped to stanch the bleeding, much less mount a successful recovery: no one believes he will last through 2024, as he told local outlet “Blick” this week he was committed to doing.

5 Begin Of Long Slide

Credit Suisse is begging investors for more patience during a year of “transition,” roughly the third year in a row it has wrong-footed investors. In 2020, it wrote down $450 million on York, a hedge fund, and paid $600 million to MBIA in a 13-year-old mortgage case, but still managed to squeeze out nearly 2.7 billion francs in net profit and a 0.10 franc per share dividend. The following year wrought Archegos’ more than $5 billion in losses, Greensill, Mozambique, and a hefty write-down on two-decades-old acquisition DLJ.

The current year may well be the worst: it will be the first to display the full client impact of the various scandals. Credit Suisse’s private bank is undercutting rivals on margins, in a bid to keep money from leaving, Tippinpoint reported on Wednesday. While necessary and inevitable, these measures will take their toll on Credit Suisse’s results. At its investment bank, early signs from the normally strong first quarter are bad for both fixed income – a traditional CSFB strength – as well as equities.

Shareholders no longer want to hear that “if only it weren’t for” the latest “extraordinary” factor, results would be great. They want the unvarnished view, decisiveness, and honesty. Lehmann needs to clarify what Credit Suisse’s strategy is following an underwhelming outing in November under his predecessor, Horta-Osório. The bank is at the beginning of a long slide, not at the apex.