Billionaire Lu Zhengyao was the ideal customer for the expansion to China for ex-Credit Suisse boss Tidjane Thiam. Now Lu’s coffee chain empire has become the target of 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 was his “poster customer”, as he liked to explain in public. He met the founder of the coffee house chain Luckin Coffee – the Chinese counterpart to the American provider Starbuck’s – umpteen times in Beijing, Thiam reported at a conference. The billionaire is a “dream customer” for the institute.
In fact, the major Swiss bank and the Chinese billionaire have for years built close ties involving both private banking and the CS investment bank. This corresponds to the claim of the self-proclaimed “entrepreneur bank”, which wants to serve company owners with a whole range of services.
Imaginary sales booked
Closeness is now taking its toll: Luckin Coffee is involved in a huge scandal and the commitment to the group threatens to become a cost gravel for the CS, as the agency “Bloomberg” reported.
Lu does not seem to be involved in the fraud at his company himself. But that doesn’t help him and his business partners much now: Individual managers had been tricking the books and posting imaginary sales of $ 310 million. That corresponds to almost 40 percent of annual sales.
In the meantime, two Chinese regulators have raided Luckin Coffee to get to the bottom of the machinations. At the US tech exchange Nasdaq, where the company made a flamboyant debut last year, the share was only a tenth of its value at the beginning of the year. Trading was suspended in early April.
Provisions for loan defaults quintupled
Although western banks like Morgan Stanley and Barclays Luckin Coffee also courted, 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 the 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 shares of around $ 100 million.
CS was also the lead 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 of the health startup Wedoctor in Hong Kong. The bank has initiated internal investigations into the case, which apparently also deal with business practices with Chinese corporate customers.
Thomas Gottstein is looking for the pieces
Thiam, once so enthusiastic, no longer wanted to comment on the affair with “Bloomberg”. Last February, he left the CS as part of the internal “Spygate” scandal. His successor Thomas Gottstein now look for 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 Thiam’s predecessor – will be retained.
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