Credit Suisse CEO Thomas Gottstein convened dozens of CEOs on a conference call on Tuesday.
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The topic was clear and the only possible one – how to mitigate the losses caused by the collapse of the hedge fund Archegos Capital. According to Bloomberg agency during the conversation with his own bankers, he faced mainly questions to which he did not know the answers.
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Due to the loans it provided to the now defunct American fund Archegos, the Swiss bank has to write off 103 billion crowns.
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According to people familiar with the conference call, Gottstein faced intense confessions about the bank’s risk profile and why it lost significantly more money than its competitors in the US hedge fund debacle.
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The CEO allegedly did not provide detailed answers. Instead, he pointed to the appointment of a new board member, Antonio Horta-Osoria, as an opportunity to rethink the company’s strategy.
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Horta-Osorio, CEO of the British group Lloyds Banking, will become a member of the Board of Directors of Credit Suisse at the end of April if voted on. Gottstein hopes that a veteran of international banking with experience in resolving controversial situations will give the Swiss bank a broader perspective.
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The bank declined to comment on the conference call information.
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Between the millstones
The members of the bank’s board of directors and its other partners demand answers from Gottstein. The shares they acquired last year have fallen by about 20 percent so far. The massive intervention associated with the fallen Archegos fund has already virtually erased their profits from the successful first quarter of this year.
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Gottstein, who promised after the scandals of his predecessor that he would run the bank with a clean slate, finds himself between dissatisfied staff and the board of directors. The members of the Board of Directors will strive for an extensive investigation not only where the problem occurred, but also to address the overall strategy of Credit Suisse.
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While other investment banks benefit from the volatile market during the uncertain recovery from the pandemic, Credit Suisse does not. This is mainly due to its losses associated with both the collapse of the Archegos fund and the unprecedented fall of its other client – the British financial company Greensill Capital.
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Many of the decisions that led to the engagement resulting in the collapse of Greensill and Archegos preceded Gottstein’s tenure as CEO. However, it is he who now has to guide the bank through a period of quantifying damage and finding strategies for survival.
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It is recovering from a much larger crackdown than other CEOs in the sector. For example, UBS boss Oswald Gruebel resigned in 2011 after the company lost “only” $ 2.3 billion due to unauthorized transactions. Gottstein’s predecessor, Tidjane Thiam, resigned due to a spy scandal, which did not directly lead to a financial loss.
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Gottstein will have to reconsider the long-standing “one-bank strategy” under which Credit Suisse has cross-sold investment bank, asset management and asset management products to the same group of clients. The asset management unit is likely to be separated from the rest of the bank.
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According to Nicolas Payen, an analyst at Kepler Ceuvreux, Credit Suisse must completely overhaul its strategy in order to be able to face risks. “Credit Suisse urgently needs a radical change,” he said in a report to clients. “In our opinion, the worst thing for her would be to keep the status quo and make only cosmetic changes to it,” he added.
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