Credit Suisse Group AG leaders are discussing replacing chief risk officer Lara Warner while saving CEO Thomas Gottstein as they count losses that could run into the billions from the collapse of Archegos Capital Management, according to insiders. on the matter.
The bank is ready to provide investors with an update on the consequences of Archegos, including the fate of top executives such as investment bank director Brian Chin, two of the people said. They also said that the Swiss firm is planning a review of its main brokerage business, which is at the investment bank.
“I think it is unfair at this stage to accuse Mr. Gottstein,” David Herro of Harris Associates, one of the bank’s major shareholders, said in a Bloomberg TV interview last week. “He tried and has been trying to reorganize Credit Suisse, but Rome was not built in a day. Unless we see evidence to the contrary, I think he is the right person to continue leading the organization. “
A Credit Suisse spokesperson declined to comment.
Read more: How Credit Suisse prepares for staggering losses likely to run into the billions
The second Swiss bank stands as one of the biggest potential losers in the Archegos collapse, which could cost banks a collective $ 10 billion, analysts at JPMorgan Chase & Co. estimated that came just weeks after Greensill’s collapse. Capital, a lender that managed the funds that Credit Suisse offered to its asset management clients.
The doublet has made Credit Suisse the top worst performing banking stock in the world so far this year, as a strong start for its investment banking business was overshadowed by the bank’s exposure to Greensill and Archegos, a family office based in New York. .
The bank’s 1.5 billion Swiss franc ($ 1.6 billion) share buyback program is at risk of being paused a second time, after it was stopped for the first time at the start of the pandemic last year, and losses could pressure the payment of dividends. S&P Global Ratings downgraded its outlook for the bank to negative from stable, pointing to risk management concerns.
An earnings shock in excess of $ 5 billion would begin to put pressure on Credit Suisse’s capital position, according to JPMorgan. Swiss regulator FINMA increased Credit Suisse’s requirements under its Pillar 2 cushion, after the bank warned it could incur a loss from the liquidation of supply chain financial funds tied to Greensill.
Here are the Credit Suisse leaders who will be at the center of the action in the days and weeks ahead:
Thomas gottstein, Executive Director
The surprise choice to take over in February 2020, following an espionage scandal that ousted Tidjane Thiam, Gottstein previously ran the bank’s business in Switzerland. When he got the job, he declared it was “ time to look forward ” but Credit Suisse’s troubles have only metastasized since.
First came a $ 450 million write-off on the bank’s stake in hedge fund York Capital and costs related to a long-standing legal case over residential mortgage-backed securities.
Then Greensill’s supply chain finance business exploded. The board of directors and regulators are investigating how Credit Suisse’s supply chain finance funds, tied to Greensill’s business, were sold to investors, including its own wealth management clients, and how the bank managed conflicts of interest. interests and your business relationship. with Greensill, Bloomberg News reported.
The Archegos episode raises questions about his handling of risk management, particularly since one of his first major initiatives was to merge the risk and compliance divisions to streamline and improve risk decision-making.
“Risk controls are not yet where they should be,” Herro said. “Hopefully this is a wake-up call to accelerate the cultural change that is needed at this company.”
Lara warner, Chief Risk and Compliance Officer
With dual Australian-American citizenship and a career ranging from equity analyst to chief financial officer of investment banks, Warner has taken a less traditional route than many of her peers to the higher levels of risk management and Credit’s executive board. Suisse. She was the highest-profile member of Thiam’s inner circle to earn a spot at Gottstein’s top spots. His promotion to chief risk and compliance officer came in the reorganization that combined the two units.
She faces some of the same tough questions as Gottstein about risk management culture and practices after her personal involvement in signing a loan to Lex Greensill in October.
In an area of banking run primarily by men immersed in risk modeling, its more business-centric approach hasn’t always worked well, according to conversations with about a half-dozen current and former employees who spoke on condition of anonymity. Several left after she took office, while those who stayed were challenged to become more involved with the business, according to the 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 risk control that has plagued this company for the better part of a decade,” Herro said.
Brian Chin, CEO of the investment bank
Along with Warner, Chin was a big winner in Gottstein’s reorganization last summer, when the commercial chief also gained control of the investment bank after the two units merged.
Its promotion, at least in part, was due to a turnaround in global markets during the latter part of the Thiam era. Now his business is under intense pressure due to Archegos’ losses.
Emissaries from several of the world’s leading brokerages tried to stem the chaos before the drama was released last Friday. Credit Suisse’s idea was to come to a kind of freeze to figure out how to disconnect positions without causing panic, according to people with knowledge of the matter.
That strategy failed, prompting the banks to start selling. Credit Suisse and Nomura issued earnings warnings on Monday. Later that day, Gottstein and Chin held a call with shocked CEOs and other executives, where they said the lender was still working to figure out the size of the hit and told the bankers that this was a time to work together and not focus on potential. impact on salary.
Paul galietto, head of stock trading
Galietto joined Credit Suisse in 2017 after a stint at UBS Group AG and a two-decade career at Merrill Lynch & Co. He headed Credit Suisse’s main brokerage unit before rising to lead the equity trading division two years ago. years.
Galietto has been tasked with assisting the investment bank in its strategy of delivering more stable results using less capital than the commercial business has historically had. While revenue has leveled off after a significant drop before Galietto’s arrival, the company lags far behind its American rivals that it used to outperform.
The equities business saw a 6% increase in revenue last year as clients were active in response to the pandemic, but that paled compared to jumps of more than 30% at some of the main rivals. The bank told investors in December that it still ranked fifth in cash trading and that its top brokerage, led by John Dabbs and Ryan Nelson, was in the top four in every major region.
Urs Rohner, President
The Chairman of Credit Suisse, who has presided over one of the most tumultuous periods in Credit Suisse’s recent history during his 10-year tenure, resigns on April 30, when Lloyds Banking Group Plc CEO Antonio Horta-Osorio, takes office.
Herro of Harris Associates, who asked him to resign in his confrontation with Thiam over the espionage scandal, has already pointed this out in the wake of the Archegos revelations.
Antonio Horta-Osorio, incoming president
The outgoing CEO of UK Lloyd’s Banking Group Plc took the bank back into private hands after a 2008 nationalization. The Portuguese citizen transformed Lloyds in his decade-long tenure, making it one of the most efficient lenders in Europe. amid thousands of job cuts.
– With the assistance of Marion Halftermeyer, Dale Crofts, Stefania Spezzati, Michael J Moore and Jonathan Ferro