Credit Suisse will take a CHF4.4bn (£3.4bn) hit in the wake of the collapse of Archegos Capital Management, and has ousted two of its top executives as the fallout from the crisis continues.
The head of Credit Suisse’s investment bank, Brian Chin, and its chief risk officer, Lara Warner, are stepping down as the bank braces for a CHF900m loss in the first quarter from its exposure to the $20bn Archegos Capital Management fire sale that has rocked Wall Street.
Christian Meissner, one of the best-known dealmakers in investment banking, who joined the Swiss bank as co-head of international wealth management investment banking advisory in October, will take over leadership of Credit Suisse’s investment bank, it said in a statement.
Meanwhile, Warner — who was only installed as chief risk officer and compliance officer in August as part of a plan to overhaul the functions — will also step down. Joachim Oechslin will temporarily replace Warner, while general counsel Thomas Grotzer was appointed temporary head of compliance.
The move means that some of Credit Suisse’s most senior executives have been ousted as a result of the Swiss bank’s exposure to the family office of hedge fund manager Bill Hwang, which was forced to sell about $20bn worth of stocks on 26 March. The huge margin call has sent ripples across Wall Street, with both Credit Suisse and Japanese bank Nomura losing billions.
Credit Suisse said that it expects to take a charge of CHF4.4bn as a result of “a US-based hedge fund to meet its margin commitments”, which will push it to a loss of CHF900m for the first quarter.
Thomas Gottstein, chief executive of Credit Suisse said that the loss was “unacceptable”.
“In combination with the recent issues around the supply chain finance funds, I recognise that these cases have caused significant concern amongst all our stakeholders. Together with the board of directors, we are fully committed to addressing these situations. Serious lessons will be learned. Credit Suisse remains a formidable institution with a rich history.”
Credit Suisse said it would be suspending its planned $1.5bn share buyback programme and reducing its dividend, to be paid through a mix of capital and retained earnings. The bank said it would not resume share purchases “before we have regained our target capital ratios and restored our dividend”. It added that it would provide an update on its exposure to supply chain finance firm, Greensill, in the coming days.
The bank’s executive board will also forgo both short-term and long-term bonuses awarded this year, while its chairman, Urs Rohner, has waived his annual fee of CHF1.5m.
“Confidence has been badly rattled with shares down 24% since March, equivalent to CHF8bn,” wrote KBW analyst, Thomas Hallett in a 6 April note. “While reducing the immediate uncertainty, capital returns have been tapered and the ability to grow earnings and deploy capital is still limited.”
Chin was installed as chief executive of Credit Suisse’s investment bank in August amid a shake-up that saw Gottstein reverse the move by former chief executive, Tidjane Thiam, to separate its sales and trading units.
A former analyst at Deloitte, he joined the Swiss bank in 2003, and headed up its markets business for four years before taking overall leadership of the investment bank.
The elevation of Meissner, a former Goldman Sachs dealmaker who ran Bank of America’s investment bank for over a decade before stepping down in 2018, is a remarkable resurgence for the Austrian banker.
Meissner was credited with reshaping Bank of America’s investment bank after the financial crisis when it merged with Merrill Lynch and expanding its international business. He stepped down amid talk that the bank had lost risk appetite for investment banking and was losing out on some key deals and was replaced by Matthew Koder.
He was linked with some of the biggest jobs in banking during his two years out of the industry, including being considered a contender for the top job at Credit Suisse rival UBS.
Credit Suisse said the bank had otherwise achieved “very strong performance” in its investment bank and increased profits across its three wealth management businesses during the quarter. It said net new assets were positive across the three arms, its asset management unit, and in the Swiss corporate and institutional business.