Credit Suisse’s new chairman, António Horta-Osório, is still skirting around one of his biggest challenges in turning the bank around: reining in its free-wheeling culture, finews.com senior contributor Katharina Bart writes.
It’s hard to glean anything from António Horta-Osório’s inaugural interview as chairman of Credit Suisse – except that he would have been a perfect fit for the diplomatic corps. There is nary a careless word or misstep in his first Swiss foray.
Like a true diplomat, what the 57-year-old Portuguese-British executive leaves unsaid is more important than what he does say. Horta-Osório is grappling with Credit Suisse’s culture. At the best of times, the 165-year-old Swiss lender has won client loyalty (and revenue) by fostering entrepreneurial risk-taking. At the worst of times, it has become embroiled in embarrassing and costly failures such as Greensill and Archegos.
One Size Fits All?
«I expect everyone to act as a team and overtime for a new culture to emerge – one of working together,» he says. Good luck with that, Sir Tónio! Cultural divides and identities run deep at Credit Suisse, and Horta-Osório has lost some momentum by avoiding a call to arms.
The simplest illustration of this is millennial investment bankers who still refer to themselves as «First Boston» despite the brand being buried by Credit Suisse 15 years ago. The moniker died after ex-CSFB CEO John Mack branded it a «giant casino», valuing speculative bets and bonuses over long-term profits.
Greensill is the latest manifestation of this attitude, with a «one-bank» twist. A Credit Suisse asset manager seized the opportunity to pick David Solo’s brain in 2017. He was rewarded with an introduction to Greensill Capital. Credit Suisse’s business with Greensill eventually expanded to $10.1 billion in funds; founder-CEO Lex Greensill as a wealth management client; and an «in» for the U.K. company’s planned stock-listing, then touted at up to $7 billion (behind paywall).
Risk On Or Off
Horta-Osório knows a distinctive capital markets culture from two years in Goldman Sachs’ corporate finance department in London and New York during the roaring 1990s. So why is he so vague about how he plans to tackle Credit Suisse’s cultural issues, one of three key problems he identified nine weeks ago?
The first reason is that Credit Suisse is still battening down the hatches, and Horta-Osório’s sanguine remarks belie the gravity of the bank’s situation. It has already locked down its risk as it reviews how Greensill, then Archegos could have happened.
Investors should look for how Horta-Osório and Richard Meddings, who is standing in as the board’s risk overseer and himself an ex-CSFB banker, take their feet of the brake pedal and allow bigger bets – chiefly in markets, but also in Asia as well as the wider wealth management arm’s lending – to go through.
Shareholder Mix
The second, even more, delicate issue is Qatar, which as Credit Suisse’s shareholder has been the driving force behind its risk-taking since 2008-09. The emirate’s surprise reduction following a swift cap hike in April may empower Horta-Osório to slash risk even more drastically, especially in its markets division but also in lending to wealthy clients.
This puts other major shareholders in the driving seat: Natixis-owned Harris Associates is now the largest, followed by Dodge & Cox and Blackrock. Handily for Horta-Osório, he knows both Dave Herro of Harris and Blackrock very well; they are Lloyds’ largest investors.
Squaring the Circle
A Credit Suisse banker once compared wandering the bank’s hallowed halls to a collection of circuses. Each was entertaining and engaging in its own way, but with no big top lending the whole thing an identity. Horta-Osório’s mission is to square the circle of finding and cultivating a common culture without choking off innovation.
