Credit Suisse is considered one of the two Swiss banking giants, but it deserves this title less and less. Its stock market value has collapsed for years, to the point well behind its competitor UBS. The Swiss number two would even have become a potential prey.
The bank founded in 1858 by Alfred Escher is little more than a shadow of itself, while rivaling almost equal to UBS, there is little. Last Friday, during the general meeting, its shareholders refused to grant discharge to the board of directors. A first in the history of Credit Suisse, which legally bears the responsibility of the managers and the board of directors for all decisions taken during the 2020 financial year.
Decisions, but also investments made under the chairmanship of Urs Rohner, made him lose all confidence among the shareholders.
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A long list of pans
The most recent reasons for such distrust date back to the debacle of the Archegos hedge fund and the financing funds of bankrupt Greensill Capital. The Greensill affair, and then the bankruptcy of Archegos, whose founder has just been sued in New York for fraud, has caused the bank an estimated loss of between 5 and 10 billion francs. These two cases are still the subject of several investigations by the Swiss Financial Markets Supervisory Authority (Finma).
This debacle is only the latest installment in a long series of pans that dragged on the second bank of Switzerland for fifteen years. Fines for billions of francs, the spinnery affair, or even dubious relations with the Bulgarian mafia, whose trial began in February, not to mention the revelations of the international media consortium called “Swiss Secrets”.
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Adding to these scandals early this year was the departure of controversial president António Horta-Osório, who resigned after violating quarantine rules. On Tuesday, four members of the group’s management were fired for their poor risk management, including Romeo Cerutti, its legal director.
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Decrease in security value
These issues, which are interrelated and undermine investor confidence, are also reflected in the value of the stock market. In 2015, the arrival of the new boss Tidjane Thiam gave shareholders hope to see the share go up. But the hope was short-lived and the curve just stared at the floor. The Credit Suisse action, which traded up to 87 francs in 2007, is worth just 6.70 francs today.
In market capitalization, Credit Suisse is worth just 17.8 billion francs, far from the nearly 90 billion the bank was worth before the subprime crisis. For François Savary, asset manager at Prime Partners, the conclusion is clear at this price: “it’s easy prey”.
Despite its annual loss of 1.57 billion francs in 2021, Credit Suisse holds a gold nugget for a potential buyer: “Wealth management is extremely interesting for competitors looking to strengthen in this area,” the analyst confirmed in a 7:30 am message. pm topic broadcast in February (see below).
Wealth management weighs more than 800 billion funds under management for Credit Suisse, which continues to be one of the world leaders in the sector. Enough to be jealous of, despite the risk management issues.
Will Credit Suisse remain Swiss?
Analyzing the title of Credit Suisse, Eric Dor, director of economic studies and professor at the IESEG School of Management in Paris and Lille, agrees with the view of François Savary. The bank can be “acquired at a good price and may be the envy of certain major European banks, which are open to cross-border consolidation”.
According to him, banks like Deutsche Bank in Germany or UniCredit in Italy could show interest.
Shocked by its mistakes, by the financial crises and by the arrival of fintechs, the number two Swiss bank could easily fall into foreign hands. A takeover in Switzerland seems unlikely, according to the two experts, because a merger with UBS would pose competition problems for the regulator. If there were a takeover, the Swiss bank would probably go into European hands.
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