Wednesday, March 29, 2023

Credit Suisse, a bank with a chain crisis that cannot get its rhythm back on track

Hit by reputational scandals, collapsed venture firms and currently by the international banking crisis that has led to the bankruptcy of the SVB, Credit Suisse, Switzerland’s second largest bank by market value, is going through its worst moment in 167 years of history, without signs of recovery.

Founded in 1856, the Zurich-based bank has lost around 30% of its value on the Zurich stock market since the middle of last week, at a time when its own internal crisis, which could date back to 2019. , has been intertwined with the most widespread that world banking is going through these days.

Hemorrhage in the account book

The entity chains two years of millionaire losses: in 2021 they were 1,572 million Swiss francs (€1,600 million), and in 2022 they almost quintupled, to 7,293 million francs (€7,400 million).

Credit Suisse also suffered last year the withdrawal of liquidity worth 123,200 million Swiss francs (€126,000 million).

Among the main factors behind these lousy accounts is its exposure to risk firms that collapsed in previous years, such as the US hedge fund Archegos or the Anglo-Australian financial services firm Greensill.

chaos in the picture

Added to the financial problems are many others around the bank’s reputation, which have caused extensive reshuffling of the board of directors in recent years.

In January of last year, the then president of the entity, Antonio Horta-Osorio, was forced to resign, for example, because it was discovered that he had traveled and attended a sporting event when he was supposedly in quarantine during the pandemic.

His successor, Alex Lehman, was recently investigated by Switzerland’s financial regulator Finma over claims made by it about the bank’s financial condition that were thought to have misled potential investors.

Lehman said in statements to Swiss public radio in December that the Zurich bank was achieving a return on its liquidity when it was actually suffering from capital flight.

press target

Also at the beginning of 2022, the bank was the subject of an investigation published by a consortium of fifty global media outlets that accused it of having kept fortunes of people linked to corruption for decades.

Those fortunes included those of people linked to the state oil company of Venezuela, leaders of the Middle East or senior intelligence officials of countries collaborating with the US in anti-terrorism matters, although the bank defended that many of these suspicious accounts had been closed for years.

Long before, in 2020, Credit Suisse was immersed in another controversy due to the discovery of cases of illegal surveillance ordered by heads of different areas at senior positions in the entity shortly before being hired by competing firms.

This then led to the resignation of the then CEO, Tidjane Thiam.

Unsuccessful restructuring to stop the bleeding

The main strategy that the bank has launched to try to put an end to its crisis -so far unsuccessfully- is the ambitious restructuring plan that began in October of last year, which included a capital increase of 4 billion francs (US$4.09 billion). , the dismissal of 9,000 workers worldwide and a 15% cut in their expenses.

The capital increase meant that the Saudi National Bank became the main shareholder of the firm, by investing 1,500 million francs (€1,530 million) in shares of the entity.

The president of the Saudi bank, Ammar al Khudairy, assured today in an interview that the entity would not increase this investment, which has contributed to the new collapse in the stock market that Credit Suisse suffers on this day.

change of hands

Until last year’s capital increase, the largest shareholder was the American group Harris Associates, which left the bank after the capital increase, now controlled by more than 20% of its shares by investors from the Middle East.

After the Saudi state bank is the Qatar Investment Authority (QIA), manager of the emirate’s sovereign wealth fund, with 5.03% of the ballots, and is followed by the Saudi Olayan group, linked to a wealthy family in the Arab country, with 5% of the shares.

The many problems that the bank is experiencing, the protagonist of negative headlines for four years, encourages rumors of bankruptcy and that it will become a kind of “Swiss Lehman Brothers”, although the country’s economic press is also considering the possibility of it being absorbed by its main competitor in the country, UBS.


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