Harris Associates, a bank shareholder for more than twenty years, sold its entire stake according to the Financial Times.
Each week brings its share of bad news for beleaguered Credit Suisse bank.
The Swiss bank has been fighting for its survival for several months.
Last October, it launched an emergency plan considered by many analysts and the markets as the last chance plan.
This plan focused on the asset management business. The company wants to cut 9,000 jobs by 2025 in an effort to reduce its cost base by 14.5 billion Swiss francs over three years.
It is also planning to split the investment bank into three parts. The investment bank was once the firm’s cash cow, but a series of scandals have cost Credit Suisse (CSGKF) several billion dollars in losses and fines imposed by regulators.
The company is also selling a “significant portion” of its Securitized Products Group business.
Investigation
But since the launch of his plan, the bank has been plagued by more scandals. While these are not as serious as the ones that led to his descent into hell, they have succeeded in distracting attention from the renovation efforts.
Last month, Credit Suisse told employees via email on February 13 that a former employee is in possession of personal information about other company employees, including people who left.
The rogue employee had legitimate access to this data while working at the bank. The employee copied and transferred the data to a personal hard drive in violation of Credit Suisse policy. The employee no longer works for the company.
The stolen information contains employment information such as employee identification, gender, address, immigration status, date of birth, Social Security number, and contact information.
The employee also took older compensation data (salary and variable compensation) for the period between 2013 and 2015.
A few days later, reports surfaced that Swiss financial regulator FINMA was reviewing statements made by Axel Lehmann, chairman of the board of directors, last fall.
At the time, Credit Suisse was facing a massive withdrawal of funds from its wealthy clients of the Wealth Management division, which “New Credit Suisse” focuses on. These clients were concerned about the financial health of the group, around which there was much speculation and rumour.
These exits raised the question of the bank’s future profitability, because if Credit Suisse doesn’t have enough assets to manage, its rates will undoubtedly decline.
To reassure the firm’s clients, Lehmann told a conference on December 1 that the outflow of clients was not continuing. That day, he told the Financial Times that after strong outflows in October, outflows had “fully stabilized” and “partially reversed.”
Harris Associates sold all of its stake
When Credit Suisse announced its full-year and fourth-quarter 2022 results, the bank reported 110.5 billion Swiss francs ($119.65 billion) in customer withdrawals during the last three months of the year. This suggests that customer withdrawals were continuing at the time of Lehmann’s statements.
As a result, the question is: Did Lehman lie to support Credit Suisse’s share price?
This information caused the drop in the price of Credit Suisse’s shares, which had already been hit for several months. As if this were not enough, Credit Suisse has just received another piece of bad news. Harris Associates, the bank’s largest shareholder for many years, has sold its entire stake, according to the Financial Times.
“Rising interest rates means a lot of European finance is going in the other direction,” David Herro, Harris’ international equity investment director, told the newspaper. “Why bet on something that is burning capital when the rest of the sector is now generating it?”
Herro is also highly critical of Credit Suisse’s strategic plan. In particular, he has harsh words for the proposed investment banking spinoff, saying it’s “awkward” and will cause more money to burn.
Harris, a Chicago, Illinois-based investment firm that manages $86 billion in assets as of September 30, 2022, acquired a large stake in Credit Suisse 20 years ago, making it the bank’s largest shareholder.
The American firm had then reduced this stake before the financial crisis of 2008. This transaction had allowed it to generate profits. Harris has distinguished himself in recent years by criticizing the bank’s various strategies.
Last January, the firm once again reduced its stake below the mandatory disclosure threshold of 3%. Harris did not participate in Credit Suisse’s capital increase late last year, diluting its shares. This decision was the sign that the firm was not convinced by the Swiss bank’s emergency plan.
With the departure of Harris Associates from the capital of the Swiss bank, the Saudi National Bank becomes the largest shareholder of Credit Suisse.
