Zurich-based financial powerhouse Credit Suisse plans to improve its operational outlook after losing one of its biggest backers.
Credit Suisse recently lost one of its most significant backers after Harris Associates sold out its entire stake in the Swiss banking giant. Harris Associates, Credit Suisse’s top shareholder for several years, decided to end ties with the Swiss bank following two decades of ownership. According to Harris Associates chief investment officer for international equities David Herro, the company offloaded Credit Suisse stock over the past months.
Herro also explained Harris opted out of the financial services platform due to its murky future. Without delving into details, the stock picker said Harris lost patience with Credit Suisse’s strategy to curb persistent losses. Furthermore, Herro, who also serves as deputy chairman of Harris Associates, said Credit Suisse’s client departure was a cause for concern.
Commenting on the bleak generality of Credit Suisse’s recent performance, Herro explained:
“There is a question about the future of the franchise. There have been large outflows from wealth management.”
Herro probably referenced Credit Suisse’s reported spike in withdrawals during the fourth quarter, amounting to outflows exceeding 110 billion Swiss francs. Suggesting that Harris has “lots of other options to invest,” the company’s stock picker also added:
“Rising interest rates mean lots of European financials are headed in the other direction. Why go for something that is burning capital when the rest of the sector is now generating it?”
Harris initially cut its 10% holding in Credit Suisse to 5% toward the end of last year. The global investment bank’s stock plunged to an all-time low last week following a dismal earnings report in February. Credit Suisse had reported that it sustained a larger-than-anticipated deficit amid record outflows. However, the loss of Harris as a prominent stakeholder could further mire the Swiss bank’s leadership in more despair.
Credit Suisse Stock Down 95% Since Summer 2007 amid Loss of Backers Harris Associates
Credit Suisse’s shares are at a staggering 95% drawdown since the summer of 2007. The Zurich-based company also missed out on a European peer rally that began in late 2022. This rally came as monetary tightening increased prospects for lending profitability.
Despite its current headwinds, including the loss of one of its principal backers, Credit Suisse remains focused on its objectives. In addition to being “ahead of our plan” and having “clear strategic objectives,” the leading Swiss financial services facilitator also added:
“We are laser focused on successfully executing our plan and on progressing toward our targets to ensure new Credit Suisse delivers sustainable value for all our stakeholders.”
Credit Suisse has increased efforts to win back clients and stop the exodus of senior staff. In addition, Switzerland’s second-largest bank also looks to overhaul its mode of operation significantly. The banking giant intends to reduce costs and jobs to resurrect its fortunes.
One of the ways Credit Suisse plans to improve its operational outlook is by creating a separate business for its investment bank. According to reports, this business would be under the bank’s CS First Boston brand.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
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