Credit Suisse needs to salvage reputation after chairman quits in latest scandal, analysts say

LONDON — Credit score Suisse Chairman Antonio Horta-Osorio resigned on Sunday after violating Covid-19 quarantine guidelines, the newest in a collection of high-profile scandals which have rocked the Swiss financial institution in recent times.

Horta-Osorio took over as chairman of Switzerland’s second-biggest lender in April final yr, with a mission to wash up its company tradition after its damaging involvement with collapsed funding agency Archegos Capital and bancrupt provide chain finance firm Greensill.

These got here on the again of a weird and protracted spying saga which finally led to the resignation of former CEO Tidjane Thiam, who was changed by Thomas Gottstein.

Horta-Osorio, who was discovered by an inside investigation to have dedicated a number of breaches of Covid quarantine necessities within the U.Ok. and Switzerland, will likely be changed by UBS govt Axel P. Lehmann. Credit score Suisse has insisted that its strategic overhaul, introduced in November and which features a scaling again of its funding banking enterprise, will proceed undeterred.

Analysts advised CNBC Monday that the financial institution had made the proper name in eradicating Horta-Osorio, and that Lehmann was a smart appointment because the agency appears to ship stability.

Bruno Verstraete, managing associate at Zurich-based asset supervisor Lakefield Companions, mentioned Lehmann was a alternative that represented the soundness the financial institution wants, given his wealth of expertise in danger administration.

“One can solely hope that the scandals will fade over time, and that they are going to have the ability to flip the nostril of the ship in the proper course, away from the storm. It’s about time, that’s clear,” Verstraete advised CNBC.

Nonetheless, some emphasised that the issues run deeper than one particular person, with the financial institution going through a litany of authorized points.

“I believe the job at hand for Credit score Suisse over the approaching months and yr is frankly to restore its danger administration, to restore its repute, and clearly one issue that must be checked out fastidiously is, can it retain its expertise?” mentioned Bob Parker, funding committee member at Quilvest and former senior advisor at Credit score Suisse.

“One factor that occurred after Archego was that quite a lot of gifted folks within the funding financial institution left the agency.”

Share worth woes

Credit score Suisse’s share worth has taken a considerable hit over the previous 12 months, and analysts have pointed to the divergence from the efficiency of its home rival UBS as a sign that buyers stay skeptical in regards to the turnaround.

Credit score Suisse is down greater than 24% over the previous yr and was final buying and selling at 9.37 Swiss francs ($10.25) per share on Monday morning, whereas UBS has gained greater than 31% previously 12 months to commerce at round 18 Swiss francs per share.

“I believe the efficiency of the share worth in latest months clearly displays the view by buyers that quite a lot of these legacy points are going to take time to restore, and I believe that’s most likely proper,” Parker mentioned.

Beat Wittmann, chairman of Zurich-based Porta Advisors, advised CNBC that Credit score Suisse might want to rebuild its repute over time via altering its enterprise practices and demonstrating management by instance, moderately than searching for fast PR victories or “culture-washing.”

“The worth efficiency distinction between Credit score Suisse and UBS is 50% — not 5, 50% — and due to this fact the shares are low cost, however for a lot of causes low cost,” Wittmann mentioned.

Nonetheless, he recommended that if the brand new chairman and administration workforce can ship stability and a strategic redirection with “self-discipline and focus,” then Credit score Suisse shares are a “massive purchase” at their present valuations.

“Key shareholders like Harris Associates, Dodge & Cox and so forth., have suffered for a few years, and most of the people as properly, so it’s all within the fingers of administration and the board to get this executed. It’s completely doable to get it executed,” he mentioned.

What does the longer term maintain?

Credit score Suisse’s third-quarter revenues had been sturdy and the financial institution beat revenue expectations regardless of successful from costs associated to settling allegations of corruption in Mozambique, together with a number of different authorized points.

Wittmann highlighted that together with sound monetary fundamentals, Credit score Suisse is working in opposition to a really supportive macro backdrop.

“For banking companies, the final yr was probably the greatest years on report by way of rising danger belongings, report M&A exercise, mainly all elements aligned and in favor of such a financial institution,” he mentioned.

Given the potential that might be unlocked ought to the revamp go as deliberate and the low share worth, Wittmann mentioned he wouldn’t be stunned to see strategic buyout efforts being launched for Credit score Suisse, noting that “the European panorama is overdue for consolidation,” as a number of regulators have identified.