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Credit Suisse’s Biggest Backer Abandons Hope, Questions “Future Of Franchise”


Credit Suisse’s Biggest Backer Abandons Hope, Questions “Future Of Franchise”

US investment manager Harris Associates has been among Credit Suisse’s most prominent supporters for years (owning as much as 10% of the flailing Swiss bank’s stock last year).

But now, that’s all over, as deputy chair and CIO David Herro tells The Financial Times that he has sold the firm’s entire stake in the bank over the last few months.

Harris started to cut its exposure in October following the bank’s SFr4bn ($4.3bn) fundraising, when Saudi National Bank supplanted it as the top investor, and had now divested completely.

“We have lots of other options to invest,” he 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?

With the stock hitting all-time record lows just last week, it seems Harris’ recent losses just broke

“It has been a measurable drag on our performance” Herro said.

“You can’t win every time — it is the business I am in. We meet every company we own, but you spend a lot more time with your problem children. Credit Suisse has been a drain of time and value for years.

“There is a question about the future of the franchise. There have been large outflows from wealth management,” he said, referring to the SFr111bn withdrawn by Credit Suisse customers in the final three months of 2022, particularly after rumors appeared on social media about the bank’s financial health.

With the bank now offering extremely high deposit rates, as we detailed here, it raises concerns about how the business can sustain such a funding gap.

“We are ahead of our plan and have clear strategic objectives,” Dominik von Arx, a Credit Suisse spokesman, said in an emailed statement.

“We are laser focused on successfully executing our plan and on progressing toward our targets.”

However, Herro has lost patience:

“We feel the plan to restructure the investment bank, while a noble cause, is cumbersome and far more costly in terms of cash burn than we expected.”

The two largest shareholders in Credit Suisse are now the Saudi National Bank, which bought a 10 per cent stake as part of the capital raising last year, and the Qatar Investment Authority, which raised its stake to 7 per cent at the same time.

Tyler Durden
Mon, 03/06/2023 – 09:20

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