Hurt by Losses, Credit Suisse Faces Reckoning Under New Chairman

As the saying goes: Hurt by Losses, Credit Suisse Faces Reckoning Under New Chairman

“When multiple people come together for a common cause, a powerful force is unleashed many times the number of individuals engaged!” 

What we’ve learned through countless examples, is the truth of those words on both the good and the evil sides of the equation.

In the case of the multiple mis-adventures described in this article, the global investment banking giant Credit Suisse, is now facing a reckoning with a new Chairman anointed to change a culture gone awry.

Unlike the case of Wells Fargo, which perpetrated a coordinated, company-wide scam on their older customers, this case seems to be one of multiple individuals and departments operating independently and without coordination in duplicity. Time will tell us more, buy newly hired Antonio Horta-Osario, the former Chief of Lloyds Banking Group certainly has his work cut out for him. The enormous losses already suffered, indicates a corporate culture in bad need of a new perspective on “How Life REALLY Works!”  I’d also suggest in all due modesty, that they could use a few hundred copies of this book! Anyone know this fellow Antonio?

If so, please make a referral or pass on, query “What Goes Around Comes Around” – Author – Rob Davis

Hurt by Losses, Credit Suisse Faces Reckoning Under New Chairman. The nearly $5 billion loss from the collapse of Archegos Capital Management was just the latest problem for Credit Suisse’s beleaguered investment bank.

Hurt by Losses, Credit Suisse Faces Reckoning Under New Chairman

The nearly $5 billion loss from the collapse of Archegos Capital Management was just the latest problem for Credit Suisse’s beleaguered investment bank.

António Horta-Osório, who started his job as chairman of Credit Suisse on Friday, is a former chief of the Lloyds Banking Group.
Credit…Simon Dawson/Reuters

After Credit Suisse said it had lost nearly $5 billion over soured trades that a small unit of its investment bank made with Archegos Capital Management, worried employees peppered Thomas Gottstein, the chief executive, with questions.

One wanted to know if bankers who weren’t involved would have to sacrifice pay over the losses. Another asked why the entire investment bank was tarnished by the actions of one errant unit.

Those questions, described by two people who attended an April 6 call with managers where those questions were asked, reflected a deeper set of concerns that have dogged Credit Suisse, its employees and shareholders for years: Can its investment bank be fixed?

Credit Suisse’s longstanding love-hate relationship with its own investment bank is on bad terms once again. After a series of missteps in the past year — including the fallout from Archegos, the investment firm run by Bill Hwang that went belly up — regulators are investigating, shareholders are angry and employee morale is flagging.

That is prompting questions about whether Credit Suisse — whose ambitions transformed it from its Swiss roots to a global bank serving some of the world’s richest people, as well as large companies and hedge funds — should scale back and focus on what it knows best: managing money for the wealthy.

It’s a question the new chairman, António Horta-Osório, will have to navigate. Mr. Horta-Osório, a former chief of the Lloyds Banking Group, started the job at Credit Suisse’s annual meeting in Zurich on Friday. In the coming months, he and the rest of the board are likely to consider a broad array of options, according to two people with knowledge of the board’s current thinking. Among the options: replacing Mr. Gottstein, who has been in the C.E.O. role for 15 months; killing off some departments in the investment bank; or selling it off entirely.

The common thread of the bank’s recent stumbles is an inability to balance its hunger for profit with adequate oversight for the risk it has taken on, an issue Mr. Horta-Osório promised to address. “I firmly believe that any banker should be at heart a risk manager,” he said.

There have already been a string of departures in acknowledgment of the bank’s risk management failures, and Friday’s meeting brought another: Andreas Gottschling, who was chairman of the board’s risk committee, stepped down.

But Mr. Gottstein “has the board’s confidence,” Mr. Horta-Osório said. And that means, at least for now, the chief executive’s job is safe — even if it won’t be easy as questions, from inside and out, pile up.

“You say the strategy is sound,” a JPMorgan Chase analyst, Kian Abouhossein, said to Mr. Gottstein during an investor call this month. “And if I look at your investment bank over five, 10, 20 years, 30 years, you do not make cost-of-equity returns,” Mr. Abouhossein said, referring to the returns investors expect based on the apparent cost of Credit Suisse’s business activities.

“So really,” he asked, “shouldn’t there be a discussion around do we really need an investment bank of this size?”

Mr. Gottstein, a 57-year-old Swiss native who worked with some of Credit Suisse’s biggest clients as an investment banker, was installed last year to help restore calm after the tumultuous exit of Tidjane Thiam.

It hasn’t worked out that way.

The bank has endured a string of body blows. An accounting scandal at Luckin Coffee, a Chinese cafe chain to which Credit Suisse provided banking and trading services, led to a $100 million write-off. A hedge-fund investment in York Capital Management went awry, prompting a $450 million write-down late last year. A $160 million loan to Greensill Capital, a corporate client that was on shaky footing, proved ill conceived when the firm collapsed a few months later. Credit Suisse took a loss on the loan, shut several Greensill funds it had sold to investors and reshuffled its money-management division.

But risk problems lingered under the surface: The departure of longtime bankers during his tenure had cost Credit Suisse valuable institutional knowledge, and the bank had built an increased zeal for working with up-and-comers, like Luckin Coffee and Greensill.

In finance, risk management — the ability to take into account a sometimes-volatile mix of bank positions, market activities, assets and liabilities, and reputational and technological concerns to foresee potential losses — is a crucial skill.

But the bank’s approach has been extremely technical, said Arturo Bris, a professor of finance at the IMD business school in Lausanne, Switzerland. An overreliance on calculation can be a problem if those in charge aren’t taking a holistic view.

“Most of these failures have much more to do with human mistakes,” he said. “I don’t think they’re good risk managers.”

Consider the Archegos collapse: The prime brokerage head of risk who oversaw Credit Suisse’s dealings with Archegos had once handled the bank’s sales relationship with the firm. Above him was a chief risk officer whose background was in finance and compliance — not risk.

Credit Suisse has held more than a half-dozen executives responsible for its recent stumbles. The last day for Brian Chin, the chief executive of the investment bank, was Friday. Lara Warner, the chief risk and compliance officer, already departed. And then there was the departure of Mr. Gottschling, the board’s risk committee leader, who did not seek re-election at the annual meeting.

Now Mr. Horta-Osório will have to figure out whether Credit Suisse can steady its investment bank with personnel changes, or if a more serious makeover is in order.

If he chooses to make big changes, he may have to move swiftly.

“Shareholders and employees cannot wait for months for a new strategy,” said Manuel Ammann, a professor at the Swiss Institute for Banking and Finance at the University of St. Gallen. “They need to deliver fast.”

Kirkus Reviews, the gold-standard for independent & accurate reviews, has this to say about

What Goes Around Comes Around:

A stable, positive, non preachy, objective voice makes the book stand apart from others in the genre. A successful guide that uses anecdotes to reveal powerful truths about life.

~ Kirkus Reviews

“The author gives readers not just points or principles to ponder, but real human experiences that demonstrate them!
Kirkus Reviews

“I’ve read a number of books that focus on sharing a similar message, including “The Secret” by Rhonda Byrne, “The Answer” by John Assaraf & Murray Smith, “The Celestine Prophecy” by James Redfield, “Think and Grow Rich,” by Napoleon Hill, and I must say that I find Rob’s to be my favorite. – Sheryl Woodhouse, founder of Livelihood Matters LLC

Hurt by Losses, Credit Suisse Faces Reckoning Under New Chairman

Hurt by Losses, Credit Suisse Faces Reckoning Under New Chairman