Credit Suisse CEO may escape fallout from Archegos

The meltdown at Archegos Capital Management has rendered Credit Suisse, the No. 2 Swiss bank, one of the biggest potential losers. The nightmare came just weeks after the collapse of Greensill Capital, a lender that ran funds which Credit Suisse pitc
The meltdown at Archegos Capital Management has rendered Credit Suisse, the No. 2 Swiss bank, one of the biggest potential losers. The nightmare came just weeks after the collapse of Greensill Capital, a lender that ran funds which Credit Suisse pitched to its asset-management customers. PHOTO: REUTERS
Credit Suisse CEO Thomas Gottstein (left) has got a vote of confidence from Mr David Herro, a partner in Harris Associates, one of the bank's top shareholders.
Credit Suisse CEO Thomas Gottstein (above) has got a vote of confidence from Mr David Herro, a partner in Harris Associates, one of the bank's top shareholders.

ZURICH • Credit Suisse Group leaders are discussing replacing chief risk officer Lara Warner while sparing chief executive Thomas Gottstein as they tally losses that could reach into the billions from the collapse of Archegos Capital Management, according to sources.

The bank is set to give investors an update on the fallout, including the fate of top executives such as investment bank chief Brian Chin, two of the sources said.

They added that the Swiss firm is planning a review of its prime brokerage business, which is housed in the investment bank.

"I think it is unfair at this stage to put this on Mr Gottstein," said Mr David Herro from Harris Associates, one of the bank's top shareholders, in a Bloomberg TV interview last week.

"He attempted and has been attempting to reorganise Credit Suisse, but Rome wasn't built in a day. Unless we see evidence to the contrary, I think he is the right person to continue to lead the organisation," he said.

A Credit Suisse spokesman declined to comment.

The No. 2 Swiss bank stands as one of the biggest potential losers in Archegos' meltdown, which could cost banks a collective US$10 billion (S$13.4 billion), JPMorgan Chase analysts estimated.

That came just weeks after the collapse of Greensill Capital, a lender that ran funds Credit Suisse offered to its asset-management clients.

The one-two punch has made Credit Suisse the worst-performing major bank stock in the world so far this year as a strong start for its investment bank business was overshadowed by exposure to Greensill and Archegos, a New York-based family office.

The bank's 1.5 billion Swiss franc (S$2.1 billion) share buyback programme is at risk of being paused for the second time - after first being stopped by the onset of the Covid-19 pandemic last year - and losses could put pressure on dividend payouts.

S&P Global Ratings downgraded its outlook for the bank to negative from stable, pointing to risk management concerns.

A hit to profit exceeding US$5 billion would start to put pressure on Credit Suisse's capital position, according to JPMorgan.

BLOOMBERG

Follow ST on LinkedIn and stay updated on the latest career news, insights and more.

A version of this article appeared in the print edition of The Straits Times on April 06, 2021, with the headline Credit Suisse CEO may escape fallout from Archegos. Subscribe