Credit Suisse’s embattled chief executive Thomas Gottstein has vowed to stay on and right the ship after the collapse of a hedge fund left the Swiss bank with hefty losses.
“As long as I have the feeling that I can add value, I’ll continue,” he told the Swiss newspaper Neuer Zürcher Zeitung in an interview. “I was moved by the approval I received from directors, clients, employees, and shareholders in this difficult situation.”
On Tuesday, Credit Suisse warned it would post its second straight pretax quarterly loss later this month because of a 4.4 billion franc ($4.7 billion) hit from its exposure to a client, Archegos Capital Management, which had borrowed heavily from prime brokerages to make bets on stocks.
Credit Suisse’s reputation as a leading wealth manager to ultrahigh-net-worth clients might also be on the line. In focus will be the bank’s decision to suspend redemptions and liquidate funds stuffed with a notional $10 billion in assets originated and packaged by now insolvent firm, Greensill Capital.
In the interview, Gottstein said the bank’s underlying business was the strongest it has been in a decade and pledged to lead a thorough review of its operations in order to restore confidence in the scandal-prone lender.
“My task together with the board is now to draw the right conclusions from both debacles, stabilize the bank, and then steer it to calmer waters,” he told the German-language paper.
He took over from Tidjane Thiam early last year following revelations that management had a star banker under surveillance after the latter defected to crosstown rival UBS.
A key figure with whom Gottstein will work closely is António Horta-Osório, who will leave his post as Lloyds Banking Group CEO to replace Urs Rohner as chairman of the board in May.
Rohner is stepping down as planned after the shareholder meeting at the end of April because of a term limit.
“With a new chairman I would assume there will also be a strategy review, which is usual in such cases,” Gottstein said, expressing his regret that Horta-Osório is now forced to take over in the middle of a crisis.
Zoom challenges
The CEO expects no sacred cows will be spared in the process, adding that one area which will undoubtedly be discussed is the division responsible for M&A advisory services, underwriting, and capital markets.
“What we can already say is that we will further remove risks in parts of our investment banking operations, and this will certainly include our prime services business,” he told the newspaper.
Several parts of the business will come under close scrutiny, including Credit Suisse’s own hedging strategy. Inspection of client accounts borrowing on margin will continue and there is the possibility that Gottstein’s own decision in July to save costs by combining risk and compliance under one departmental roof may be reversed.
Gottstein also pledged to do everything in his power over the coming months to assert claims on behalf of his clients facing losses on their investment in the Greensill supply-chain finance funds.
“These are professional money managers that mostly put about 5% to 10% of their overall assets they entrusted with us into this fund to diversify their portfolio. It still hurts, and naturally we have to win back lost trust,” Gottstein said in the interview.
Credit Suisse may choose to pursue its own insurance broker for failing to inform with enough advance warning that Tokio Marine would allow its insurance policies on Greensill assets to expire at the end of February.
Gottstein remained confident that a large share of the assets would be saved, and further redemptions were due in the coming days above and beyond the $3.1 billion recovered last month.
Finally, he also had a warning for fellow CEOs in the industry: They, too, might find themselves facing unforeseen events given the inability to conduct proper due diligence during the pandemic.
“It has to be said in fairness that it is a challenge managing a global bank via Zoom,” Gottstein told the Swiss daily.
“I am convinced that in the times of COVID-19 controlling risks is more difficult, whether for a bank or an insurer. That’s not to be understood as an excuse, but it is a fact with which we unfortunately have to contend.”
