Credit Suisse Group AG leaders are discussing replacing Chief Risk Officer Lara Warner while avoiding CEO Thomas Guchstein as they count the billions in losses from the collapse of Archegos Capital Management, according to people familiar with the matter.
The bank is set to provide investors with an update on the Archegos fallout, including the fate of top executives like investment bank head Brian Chen, two people said. They also said that the Swiss firm is planning to review its major brokerage business, which is based at the investment bank.
“I think it’s unfair at this point to put this on Mr. Gutstein,” David Hero of Harris Associates, a major shareholder at the bank, said in a televised interview with Bloomberg last week. He had tried and was trying to reorganize Credit Suisse, but Rome wasn’t built in a day. Unless we see evidence to the contrary, I think he is the right person to continue to lead the organization. “
A Credit Suisse spokesman declined to comment.
Swiss Bank No. 2 stands as one of the biggest potential losers in the collapse in Archegos, which could cost the banks a combined $ 10 billion, JPMorgan Chase & Co. analysts estimate. It came just weeks after the collapse of Greensel Capital, the lender managing the money that Credit Suisse provided to its clients in asset management.
One punch two made Credit Suisse the worst performing major bank stock in the world so far this year, as the bank’s exposure to Greensill and Archegos, a New York-based family office, overshadowed a strong start to the investment bank’s business. .
The bank’s share buyback program of 1.5 billion Swiss francs ($ 1.6 billion) is at risk of being paused for a second time – after it was suspended for the first time at the start of the pandemic last year – and losses could put pressure on dividends. S&P Global Ratings lowered its outlook for the bank to negative from stable, citing risk management concerns.
According to JPMorgan, a hit with earnings in excess of $ 5 billion will start to squeeze Credit Suisse’s capital position. Swiss regulator FINMA increased Credit Suisse requirements under its Pillar 2 buffer, after the bank warned that it could incur a loss from terminating supply chain financing funds linked to Gensel.
Here are the Credit Suisse leaders who will be at the center of the action in the coming days and weeks:
Thomas Gottstein, chief executive officer
Sudden selection to take over in February 2020, after a spying scandal that led to Tidjan Thiam being fired, Guchstein previously led the bank’s business in Switzerland. When he got the job, he declared that it was time to look ahead, but Credit Suisse’s troubles have only spread since then.
First came the $ 450 million write-off of the bank’s stake in the hedge fund York Capital and the costs related to a long-running legal case in residential mortgage-backed securities.
Then Gensel’s supply chain finance business exploded. The board and regulators are looking at how Credit Suisse’s supply chain financing funds associated with Greensill’s business are selling to investors, including to wealth management clients, how the bank manages conflicts of interest and its business relationships with Greensel, Bloomberg News reported.
The Archegos episode raises questions about his approach to risk management, especially since one of his first major initiatives was to integrate risk and compliance departments to simplify and improve risk decision-making.
“Still, risk controls aren’t where they should be,” said Hiro. “We hope this is a wake-up call to accelerate the cultural change required in this company.”
Lara WarnerChief Risk and Compliance Officer
With dual Australian-American citizenship and her career ranging from equity analyst to chief financial officer of an investment bank, Warner has taken a less traditional path from many of her peers to the highest levels of risk management and the Executive Board of Credit Suisse Bank. She was the most famous member of Thiam’s inner circle to win a place in the upper ranks of Gottstein. Her promotion to Head of Risk and Compliance Management came in the cabinet reshuffle that saw the two units merge.
She faces some of the same tough questions as Gottstein about risk management practices and culture after her personal involvement in signing a loan to Lex Greensill in October.
In banking that’s mostly run by men steeped in risk models, its business-focused approach hasn’t always been good, according to conversations with about half a dozen current and former employees who spoke on condition of anonymity. Many of them left after taking office, while those who remained faced the challenge of getting more involved in the business, according to people who worked with her.
“For the good parts of Credit Suisse to flourish, you need to get rid of the bad parts and that’s the control of the risks that have plagued this company for a decade,” Herro said.
Brian Chen, CEO of the investment bank
Along with Warner, Chen was a big winner in the Gutstein change last summer, when the head of trading also won control of the investment bank after the two units merged.
His promotion was – at least in part – due to a shift in fortunes on world markets during the latter part of Thiam’s era. Now, his company is under severe pressure due to Archegos’ losses.
Envoys from many of the world’s major brokerage firms tried to avoid chaos before the drama spilled over to the public last Friday. Credit Suisse’s idea was to come to a kind of stalemate of figuring out how to de-escalate situations without triggering panic, according to people with knowledge of the subject.
That strategy failed, prompting banks to start selling. Credit Suisse and Nomura issued earnings warnings on Monday. Later in the day, Gutstein and Chen had a call with managing directors and other executives who were shocked, saying that the lender was still working on figuring out the size of the hit and telling bankers that this was the time to get together and not focus on the potential. Impact on wages.
Paul GalitoHead of Stock Trading
Galietto joined Credit Suisse in 2017 after a stint at UBS Group AG and two decades at Merrill Lynch & Co. He ran Credit Suisse’s main brokerage unit before rising to lead the stock trading division two years ago.
Galietto is tasked with helping the investment bank with its strategy of providing more stable results while using less capital than businesses have historically been. While revenue has stabilized after a big drop before the arrival of Galito, the company ranks far behind US competitors it used to outpace.
The equity business reported a 6% increase in revenue last year as customers were active in responding to the pandemic, but that pales in comparison to jumps of more than 30% in some of the major competitors. The bank told investors in December that it still ranked fifth in cash trading and that the main brokerage firm, led by John Dabbs and Ryan Nelson, was in the top four in each major region.
Urs Runner, President
Credit Suisse chairman, who presided over one of the most turbulent periods in Credit Suisse’s recent history during his 10-year tenure, steps down on April 30, when Antonio Horta Osorio, chief executive of Lloyd’s Banking Group, took the post.
Herro of Harris Associates, who called him to resign in his confrontation with Thiam over the espionage scandal, had already chosen him in the wake of the revelation of Archegos.
Antonio Horta OsorioNext president
The outgoing CEO of Lloyd’s Banking Group Plc in the United Kingdom led the bank into the hands of the private sector after nationalization in 2008. The Portuguese citizen transformed Lloyd’s in his decade-long tenure, making it one of the most efficient lenders in Europe among thousands of jobs cut .
– With help from Marion Halftermeier, Del Croftts, Stephania Spzatti, Michael J. Moore and Jonathan Ferro