Little news is expected during Credit Suisse's investor deep dive next week, research by finews.asia indicates. That is a fundamental problem that is very relevant to others.

«We are on track», says the chairman of Switzerland's second-largest bank, Axel Lehmann, while smiling at employees on the bank's intranet. He and CEO Thomas Gottstein are probably going to pass the same message on to investors next Tuesday at the bank's deep dive.

It is likely to be little more than an opportunity to parade new management appointments while re-emphasizing the bank's new strategy set last November, research by finews.asia indicates. At least that is what the institute has been telling the analyst community in advance.

Shares at a Low Point

But the message that everything is going to plan doesn't pass even the most basic sanity check. On Monday, a ruling in Bellinzona is expected in the drug ring trial. Tons of cocaine, money laundering, and a gang of former Bulgarian professional wrestlers are at the heart of the case, which has already occupied courts in Spain, Romania, Italy, and Bulgaria. Among the five defendants is a former Credit Suisse banker. The bank itself stands accused of organizational deficiencies related to money laundering by the Swiss Attorney General. A ruling against it could have unexpected consequences.

On 27 July 2022, it is expected to report another loss. The share price is currently at the lowest it has been in years, pressured by speculation of a takeover, further capital dilution, and the negative market and banking environment. It is currently slightly below 6 francs ($6.3), which means the price is down by one-third since the start of the year.

Inkling of Information

Anything that might drive the share price up has become an urgent imperative. But market observers don't expect to see anything in that respect next week. At most, they are hoping for some inkling that there is some good news related to the operational business.

Many hope that the bank will be able to report that the wealth management business was in a position to attract new money. But the announcement from competitors doesn't paint a great picture right now. Beyond that, the outlook in investment banking remains dim.

Old-school M&A is practically at a standstill while the exit from prime brokerage following the Archegos debacle is likely to have deeply impacted trading activities - negatively.

Chairman Deflects

Too little, too late. That is a charge that has been leveled by one of the doyens of the local banking scene, who requested to remain anonymous. The accusation is directed at Gottstein. He is seen as a good and solid executive and one who knows the bank better than anyone else in senior management. But he has too little verve or ambition to get the bank out of the morass it is in quickly enough.

Even though many have been trying to undermine his position, the board is not likely to give up his know-how all that easily. Lehmann, the chairman, has been deflecting critics while taking the CEO under his umbrella. «The chairman has expressed its full confidence in Thomas Gottstein. Nothing has changed», is what the bank has been saying recently when asked.

Wishful Thinking

Lehmann needs to be doing other things than simply being a protector. He is an expert in risk management and a guarantor of reform in that area, along with a change in corporate culture. But the best defense does little if employees do not follow internal rules. And that is exactly what happened in the past at Credit Suisse and here is where Lehmann has to show concrete results.

This could all be a sign of deeper malaise. In practice, the bank is not very innovative and it has a problem with anything new. But at least in that respect, they are not alone. Even though the entirety of Swiss finance seems to say they stand for innovation and digitalization and speak of a new generation of clients, much of it is wishful thinking.

Least Change Possible

One of the reasons for that could be that the management levels two steps down from the executive board are predominantly staffed by men above the age of 50. They have very few incentives to change processes and business models. Doing so would be risky and it could endanger their position. They are transformation refuseniks. They do best with the least amount of change possible by keeping things like they are.

Not only are they evading the burning questions that the bank is facing, they are also missing an opportunity. All of this, taken together, creates complete gridlock – ad absurdum at that.

Reporting: Claude Baumann, Samuel Gerber, Andrew Isbester