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

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

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LONDON — The departure of Credit Suisse Chairman Antonio Horta-Osorio has raised concerns over whether the beleaguered lender will stick to its strategic overhaul plans after being hired to help it deal with the implosion of collapsed investment firm Archegos and the insolvency of UK supply chain finance firm Greenshill Capital.

ANNA LOZMANN, ANALYST AT S&P RATING AGENCY:

“In terms of ESG (environmental, social and governance issues), the group is a negative outlier compared to its Swiss-based peers and compared to its national peers. And that’s largely down to two facts: their turnover in leadership and the negative news they’ve had for a few years now.

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ALESSANDRO ROCCATI, SENIOR VICE PRESIDENT OF MOODY’S RATING AGENCY IN LONDON:

“The stability of senior management and the board of directors are important factors in stabilizing the CS franchise and improving its corporate governance. Given the cultural shift required to achieve this goal, we anticipate this will take some time, including dealing with differences in perspective and challenges along the way. CS’s corporate governance practices have weaknesses and flaws, and its financial, compliance and risk policies could not avert losses on Archegos and customer relationship issues related to Greensill.

ANDREW COOMBS, NICHOLAS HERMAN, SAIFUR RAHMAN, ANALYSTS, CITI:

“Credit Suisse can ill afford another scandal after the events of the past two years and yet its chairman, Antonio Horta-Osorio, is stepping down after just eight months in the role, after breaching COVID quarantine rules. Ultimately, Mr. Horta-Osorio’s tenure as chairman will go down as a short footnote in Credit Suisse’s long history. Questions were raised about the suitability of his appointment (based on his lack of investment and private banking experience) and the subsequent strategic review met with mixed reviews, but his departure leaves the Credit Suisse with a lack of strong people at the top and leadership issues. will likely be raised. New chairman Axel Lehmann is expected 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 in strategy and that the team existing management would remain in place. ”

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MICHAEL KUNZ, ANALYST, ZURCHER KANTONALBANK:

“Horta-Osorio had already come under public pressure in recent days after he appeared to take a dim view of travel regulations in the age of coronavirus. His successor brings with him extensive experience of the Swiss banking scene. But whether he will succeed in quickly bringing Credit Suisse back to calmer waters, so that the bank can once again fully focus on its operational business, remains to be seen in view of the many attempts to do so in recent years.

“In this regard, there is still no reason to bet on the shares of the CS group. We stick to our “Market Perform” rating.

BARCLAYS STRATEGISTS:

“We believe there will be further questions about the execution of the recent strategic plan and whether the franchise will see any new release of talent. That said, we believe expectations for the group are not high (equities are are trading at 5.9 times expected underlying earnings for 2022), with many investors we speak to already very cautious about the outlook for the group.

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“We also think the strategy that was presented was very growth oriented, and we wanted to see more focus on how the business and risk culture was changing. With the new chairman’s experience in managing risks, we could see more confidence returning to this area.

JP MORGAN STRATEGISTS:

“The resignation of the chairman is another negative point: to remain underweight.

“We view the resignation of Antonio Horta-Osorio as CSG President after a board-commissioned investigation as a negative outcome for CSG, following a series of incidents in 2021, including Greensill and Archegos. While CSG indicates that it will continue to execute its strategy, we believe that the continued turnover with management changes brings additional uncertainty to the group and, strategically, it also creates uncertainty.

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Credit Suisse Group also announced that the Board of Directors has appointed Axel P. Lehmann as Chairman of the bank effective immediately. Axel Lehmann has, in our view, a well-established profile in Switzerland and, together with the CEO, he is likely to continue to work on improving the Group’s risk culture, which was also underlined by Antonio Horta-Osorio after his appointment. However, we believe that these issues at CSG will lead to scrutiny from regulators, the group’s risk aversion and therefore the implied cost of equity will likely remain high and we reiterate the underweight.

JUSTIN TANG, HEAD OF ASIAN RESEARCH AT UNITED FIRST PARTNERS, SINGAPORE:

“They’ve been in the ‘damaged property’ section for a while now. While Horta was responsible for the new strategy, his short tenure means the overhaul will likely only be in its infancy.

“The irony of it all is that Horta was hired to repair damage to Credit Suisse’s reputation and revamp its risk-taking culture within the bank.

“I don’t think Credit Suisse has much choice when it comes to strategy – they have to fix the damage, revamp the culture, regain investor confidence and rebuild the franchise.” (Reporting by Danilo Masoni in MILAN, Brenna Hughes Neghaiwi in ZURICH and Anshuman Daga in SINGAPORE; Compiled by Saikat Chatterjee)

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