Credit Suisse Chairman Horta-Osorio resigns over COVID-19 breaches

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Antonio Horta-Osorio speaks at the British Chambers of Commerce annual meeting in central London, Britain, February 10, 2015. REUTERS/Stefan Wermuth

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LONDON, Jan 17 (Reuters) - Credit Suisse (CSGN.S) Chairman Antonio Horta-Osorio's departure has raised concerns about whether the Swiss bank will stick to its overhaul as he had been brought in to deal with the fallout from the collapse of investment firm Archegos and the insolvency of supply chain finance company Greensill Capital. read more


"We look at how the bank itself defines its risk appetite, and how the bank then actually implements and controls it. For us, the main thing we will be looking at is how the bank manages to do that. We also see quite high execution risks, translating into the negative outlook.

"Compared to its peers, it is rated one to two notches lower than most other global universal and trading banks. We generally see investment banking activities as riskier activities at all banks and our (Credit Suisse) ratings quite explicitly reflect the relatively high weight of the investment bank, and not in a positive manner."

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"It's the second stroke that I think probably was what broke the camel's back. Antonio did the honourable thing in this case, to present his resignation to the board.

"To some extent, they were lucky in this situation because they have a relatively safe pair of hands. Axel Lehmann is a risk manager, essentially. He's been the COO at UBS, I believe, for three years before becoming the president of the bank. So I think he knows the working of the banks. He has a strong focus on risk, which I believe is what Credit Suisse needs.

"Antonio Horta-Osorio was always going to be a more active chair, for lack of a better expression, and this one, Axel seem a bit more low profile type. This is something that Credit Suisse needs at the moment, because the bank needs to be focused on the inner workings of these engines, and I think needs to remain out of the headlines."


"In terms of ESG (environmental, social, and governance issues), the group is a negative outlier compared to Swiss-based peers and compared to domestic peers. And this is broadly due to two facts: their turnover in management and the negative news that they have had over a few years by now."


"Top management and board stability are important factors in order to stabilize CS's franchise and improve its corporate governance. Given the cultural change required to achieve this objective, we expect that this will take some time including dealing with difference in views and challenges along the way. CS's corporate governance practices have weaknesses and flaws, and its financial, compliance and risk policies were unable to avoid losses on Archegos and customer relationship issues related to Greensill."


"Credit Suisse can ill-afford another scandal after the events of the past two years and yet now finds its chairman, Antonio Horta-Osorio, stepping down after just eight months in the role, after breaching COVID quarantine rules. Ultimately, Mr Horta-Osorio's time as chairman will go down as a short footnote in Credit Suisse's long history. Questions were raised about the appropriateness of his appointment (based on his lack of experience in investment and private banking) and the subsequent strategic review met with mixed reviews, but his departure leaves Credit Suisse with a lack of strong characters at the top and leadership questions will likely be raised. The new chairman, Axel Lehmann, is likely to see a return to a more traditional chairman-CEO relationship and he has already insisted in an interview with Reuters that there will be no change to strategy and that the existing management team will remain in place."


"Horta-Osorio had already come under public pressure in recent days after he seems to have taken a dim view of travel regulations in the coronavirus era. His successor brings with him extensive experience in the Swiss banking scene. But whether he will succeed in quickly bringing Credit Suisse into calmer waters, so that the bank can once again fully concentrate on its operative business, remains to be seen in view of the many attempts in this direction in recent years.

"In this respect, there is still no reason to bet on the stocks of the CS Group. We are sticking to our 'Market Perform' rating."


"We think there will be further questions about execution of the recent strategy plan, and whether the franchise will see a further outflow of talent. That said, we think expectations for the group are not high, (the shares trading at 5.9 times 2022 expected underlying earnings), with many investors we speak to already very cautious on the group's prospects.

"We also think that the strategy that was presented was very much focussed on growth, and we had wanted to see more focus on how the business and risk culture was changing. With the new chairman's history in risk management we could see greater confidence returning in this area."


"Resignation of Chairman another negative: Remain Underweight.

"We see the resignation of Antonio Horta-Osorio as chairman of CSG post an investigation commissioned by the Board of Directors as a negative outcome for CSG, following on from a series of mishaps in 2021 including Greensill, Archegos. While CSG indicates it will continue to execute its strategy, we believe the ongoing turnover with management changes brings further uncertainty into the Group and strategically it creates uncertainty as well.

"Axel Lehmann in our view has a well-established profile in Switzerland and he along with the CEO is likely to continue working on improving the risk culture of the Group, something that was highlighted by Antonio Horta-Osorio post his appointment as well. However, we believe these issues at CSG are going to lead to ongoing scrutiny by regulators, group risk aversion and hence implied cost of equity will likely stay high and we reiterate the underweight."


"It has been in the 'damaged goods' section for a while now. While Horta was responsible for the new strategy, his short tenure means that the revamp is likely to only be in the nascent stages.

"The irony of it is that Horta was hired to fix the reputational damage to Credit Suisse and revamp its risk-taking culture. I don't think Credit Suisse has much choice over strategy - they need to repair the damage, revamp the culture, regain investor confidence and rebuild the franchise."

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Reporting by Danilo Masoni in Milan, Brenna Hughes Neghaiwi in Zurich and Anshuman Daga in Singapore; Compiled by Saikat Chatterjee; Editing by David Clarke

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