The European financial sector is currently a no-go zone for many investors – but not for David Herro of Harris Associates. The US investment company has a five per cent stake in Credit Suisse.

The US value investor Harris Associates is confident the Swiss financial institution will deliver robust growth, chief investment officer for international equities David Herro said in an interview with the Swiss financial newspaper «Finanz und Wirtschaft» (article in German).

«Six months ago Credit Suisse shares were around 26 francs. I don’t see any reason why CS shares can’t be worth half as much more, » Herro commented on his company’s stake. «By 2017, the restructuring will be mostly if not fully completed and Credit Suisse will be in a position of solid capitalization.»

Two or Three Years Too Late

David Herro supports the bank’s CEO Tidjane Thiam. He came into a difficult inheritance but is taking the right measures, Herro believes.
«He wants to put the resources beyond the cycle where they can generate the most profit,» Herro said.

Through this restructuring the risks in investment banking will be reduced and the released capital will be used to accelerate expansion in wealth management. «This strategy should have been put in place two or three years ago,» Herro said, an obvious criticism directed at the board of directors.

Bad Sentiment

While he was on the subject, Herro also said the board could benefit from a boost in banking know-how. «In a complicated financial institution like Credit Suisse, people are needed in the oversight body who understand the business and can make sure no such blunders are allowed to happen,» Herro said.

Now those responsible for the problems are facing the music, the American finance expert said. That is why they are spreading bad sentiment in the media.

Should Keep Their Mouths Shut

When traders place their bets right, they earn a lot of money. «We shareholders however hardly see any of that. On the other hand, they face practically no penalty when things go badly. But we do. That is not right,» Herro said.

«Therefore those affected should keep their mouths shut and feel guilty for the decimation of value they have caused us shareholders,» Herro hammered home the point.