Yet another communications mishap is pushing Credit Suisse's stock price lower and diminishing the bank's turnaround prospects.
In early December last year, Credit Suisse Chairman Axel Lehmann told Swiss broadcaster «SRF» (in German) that client money outflows had stabilized, and was pleased the bank's share price was again trading above three francs. That euphoria was short-lived as Credit Suisse shares fell to a new historic low of 2.60 francs this morning.
The selloff comes amidst an investigation by the Swiss Financial Market Supervisory Authority (Finma), as «Reuters» first reported Tuesday. The authority is reviewing various statements made by Lehmann to English-language media, as also reported by finews.asia, and revolves around whether he was fully transparent in his public comments.
Series of Communication Lapses
The presumption of innocence still applies, but client outflows were far from being halted at the beginning of December as annual figures published at the beginning of February 2023 revealed.
Specifically, there is a discrepancy of around 15 percent between Lehmann's interview statements and the figures reported for the full quarter. This resulted in a further erosion of confidence, which is once again due, to put it mildly, to highly inept communication. The latest mishap is one in a series of communications lapses causing massive damage to Credit Suisse for over six months and is diminishing the prospect of a turnaround.
Completely Underestimating News Flow
Although communication is not a core business of Credit Suisse, it is all the more regrettable, because it should be practiced in the necessary art of circumspection and foresight, particularly in these times of fake news sources in social media. Credit Suisse management under the leadership of CEO Ulrich Koerner completely underestimated this since August, believing that they could bide their time until the October 27 investor day last year with radio silence.
It soon became apparent that the approach doesn't work in today's total information age. The bank then began to communicate in dribs and drabs with a hodgepodge of a strategy. The low point of that communication policy was reached when an Australian blogger suggested the bank was threatened with insolvency, which was never the case.
Bad News and Thin Ice
Still, Credit Suisse continued to skate on thin ice. Above all, it failed to capitalize on the momentum at October's Investor Day to shape the narrative in such a way as to lift the share price. Instead, the opposite happened.
The bad news about the outflow of customer funds exacerbated the downward slide, and Lehmann's few public appearances didn't produce the hoped-for success, as is now painfully apparent in Finma's investigation.
Either Lehmann was all too naive in his role as Chairman or was ill-advised. Former journalist Rob Cox, hastily hired as head of communications in the spring, threw in the towel just nine months later which points to a confused situation in such an important area of the bank. Since then, Cindy Leggett-Flynn, an American who has had little to do with banks and even less with Switzerland, has been tasked with creating a new order in the department.
Hardly Rewarded
So far, she has little to show for her efforts. When Credit Suisse's annual figures were announced on February 9, much of the dismal state of affairs was already known, but the share price still plummeted by another 15 percent. Add to that this and this morning's drop of five percent, and you hardly have the best conditions for stopping the outflow of customer funds in the long term.
