Harris Associates, shareholder of the bank for more than twenty years, sold its entire stake according to the Financial Times.
Each week brings its share of bad news for the embattled bank Credit Suisse.
The Swiss bank has been struggling for several months for its survival.
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 firm wants to cut 9,000 jobs by 2025 in an effort to reduce its cost base by 14.5 billion Swiss francs in three years.
It is also planning to break up the investment bank into three parts. The investment bank was once the company’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.
But since the launch of its plan, the bank has been plagued by more scandals. While these are not as serious as those which led to its descent into hell, they have managed to distract from the efforts of revamp.
Last month, Credit Suisse told employees by email on Feb. 13 that a former employee is in possession of personal information of other employees of the firm, including people who have left.
The rogue employee had legitimate access to this data when he worked at the bank. The employee copied and transferred the data to a personal hard drive in violation of Credit Suisse policy. The employee is no longer working for the firm.
The stolen information contains employment information such as employee ID, 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 emerged that the Swiss financial regulator FINMA was reviewing statements made by Axel Lehmann, the 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, on which the “New Credit Suisse” is centered. These customers were worried about the financial health of the group, around which there were many speculations and rumors.
These outflows raised the question of the bank’s future profitability, because if Credit Suisse does not have enough assets to manage, its fees will undoubtedly decrease.
To reassure the firm’s clients, Lehmann said at a conference on Dec. 1 that customer outflows were not continuing. On that day, he asserted to the Financial Times that, after strong outflows in October, the outflows had “completely flattened out” and “partially reversed”.
Harris Associates Sold Its Entire Stake
When Credit Suisse announced its annual and fourth quarter results of 2022, the bank reported 110.5 billion Swiss francs ($119.65 billion) in withdrawals from customers 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 Credit Suisse share price to fall, which had already been battered for several months. As if this wasn’t enough, Credit Suisse has just received another piece of bad news. Harris Associates, the bank’s biggest shareholder for many years, has sold its entire stake, according to the Financial Times.
“Rising interest rates mean lots of European financials are headed in the other direction,” David Herro, Chief Investment Officer for international equities at Harris, told the newspaper. “Why go for 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. He notably has harsh words for the proposed investment banking spin-off, saying it’s “cumbersome” 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, had 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 enabled it to generate a profit. Harris has distinguished itself in recent years by criticizing the bank’s various strategies.
Last January, the firm again reduced its participation below the mandatory reporting threshold of 3%. Harris did not participate in Credit Suisse’s capital raise late last year, which diluted its shares. This decision was the sign that the firm was not convinced by the emergency plan of the Swiss bank.
With the exit of Harris Associates from the capital of the Swiss bank, the Saudi National Bank becomes the largest shareholder of Credit Suisse.