One of the largest shareholders in Credit Suisse has their reaffirmed support for senior executives at the Swiss lender, despite a damning report blaming the bank’s $5.5bn loss from Archegos on a “fundamental failure of management”.
Credit Suisse’s share price has nosedived by 25% since the end of March following the implosion of New York-based family office Archegos Capital Management.
A 172-page report published on 29 July by law firm Paul, Weiss, Rifkind, Wharton & Garrison said the bank was “focused on maximising short-term profits” and failed to rein in — or even enabled — Archegos’ “voracious risk-taking”.
The report also highlighted a “lackadaisical attitude towards risk and risk discipline” at the bank.
Despite the report’s conclusions, David Herro, portfolio manager and chief investment officer of international equities at Harris Associates — one of Credit Suisse’s top three shareholders — said he was bullish about the bank’s future prospects.
“I’m pleased that the company, led by the new chairman, is rapidly addressing these deficiencies,” Herro told Financial News following publication of last week’s Archegos review.
Herro said António Horta-Osório, who took over as chair in May from Urs Rohner, “is extremely capable” and “will be able to greatly improve the operations across the board.”
According to Herro, Credit Suisse is “well positioned, especially with its access to rapid growth in wealth management, and still has some strong franchises in the investment bank”.
“Today, capital is strong and valuation is quite low, so [it is] very attractive to us,” said Herro.
Other Credit Suisse investors have expressed confidence in the bank’s management to draw a line under the Archegos.
Filippo Alloatti, a senior credit analyst at the international business of Federated Hermes, said the internal report on Archegos “makes for uncomfortable reading”.
“The only small positive of that report was no sign of any pending regulatory fallout,” said Alloatti, whose firm has exposure to Credit Suisse via its credit portfolios.
However, Alloatti said he was optimistic about the appointment of Credit Suisse’s new chief risk officer, David Wildermuth, who takes up the role in February.
The Goldman Sachs executive will replace Lara Warner, who exited in April.
“The franchise has the strengths to put these failures behind it. With a strategy update on the horizon, the new chair may want to make some changes,” said Alloatti.
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