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After Taking $4.7 Billion Hit, Credit Suisse Executives Step Down
The firm has also launched two investigations, suspended its share buyback program, and reduced its proposed dividends for the first quarter.
The hits keep coming for investment banking giant Credit Suisse.
The firm announced Tuesday that it expects to take a CHF 4.4 billion (USD $4.7 billion) writedown following losses related to family office Archegos Capital Management’s failure to meet its margin requirements.
Executives are stepping down, and the firm has launched two investigations: one into Archegos, and another into Credit Suisse’s purchase of Greensill Capital’s supply chain debt. Thomas Gottstein, chief executive officer of the firm, called the losses tied to Archegos “unacceptable.”
In 2020, the firm faced its fair share of challenges too. In November, Credit Suisse told investors that it was taking a $450 million impairment on its stake in hedge fund York Capital Management, which announced it was winding down some of its businesses after a strategic review. And two of its clients — Luckin Coffee and Wirecard AG — spent much of the year embroiled in scandal.
The firm said Tuesday that Brian Chin, the chief executive officer of its investment bank is stepping down on April 30, while chief risk and compliance officer Lara Warner is leaving the bank immediately. Chin will be replaced by Christian Meissner, the bank’s co-head of IWM investment banking advisory and vice chairman of investment banking, on May 1.
Joachim Oechslin, who had most recently been Credit Suisse’s senior advisor and chief of staff to the CEO, will now become the interim chief risk officer and a member of its board. Oechslin had previously worked as chief risk officer for Credit Suisse from January 2014 through February 2019. Thomas Grotzer, who had been general counsel and a member of the firm’s executive board, is stepping down to become the interim head of global compliance for the group.
According to Credit Suisse’s Tuesday announcements, the firm has activated a “tactical crisis committee” in response to supply chain finance firm Greensill Capital filing for insolvency, which included its chairman, Urs Rohner, as well as the chairs of its audit, risk, and conduct and financial crime control committees.
In March, Credit Suisse said it would liquidate roughly $10 billion in funds tied to Greensill, then began restructuring its own asset and wealth management business, replacing the head of its asset management division, Eric Varvel, with Ulrich Körner, former chief executive officer of UBS Group’s asset management unit, Institutional Investor previously reported.
The firm’s four supply chain finance funds “continue to see cash inflows,” and it plans to share a separate update on repayments in the coming days, according to its Tuesday announcement. A spokesperson for Greensill did not return an email seeking comment on Tuesday.
The crisis committee is now also looking into the Archegos blowup. In late March, Tiger Cub Bill Hwang’s family office triggered huge losses on a few stocks, including ViacomCBS and Discovery, impacting six banks, including Credit Suisse. A spokesperson for Archegos did not immediately return an email seeking comment.
[II Deep Dive: Archegos Capital Blowup Could Crack Open a ‘Regulatory Piñata’]
“In combination with the recent issues around the supply chain finance funds, I recognize that these cases have caused significant concern amongst all our stakeholders,” Gottstein said in a statement Tuesday. “Together with the board of directors, we are fully committed to addressing these situations. Serious lessons will be learned.”
Its board launched two investigations that will be completed by outside parties and supervised by a special committee of board members to “not only focus on the direct issues arising from those matters, but also reflect on the broader consequences and lessons learned.”
Credit Suisse is set to report its first-quarter earnings results on April 22, according to the announcement. The firm expects to report a pre-tax loss for the quarter of approximately $965 million. Credit Suisse has suspended its share buyback program and reduced its proposed dividend as well.
A spokesperson for the firm did not immediately return an email seeking comment on Tuesday.