Credit Suisse Chairman Horta-Osorio Says Big Investors Support Overhaul

Lloyds Banking Group CEO Antonio Horta Osorio arrives at a garden party at Buckingham Palace, London on May 22, 2018. REUTERS / Simon Dawson / File Photo

ZURICH, Nov. 7 (Reuters) – Major shareholders of Credit Suisse (CSGN.S) back the scandal-hit bank’s new strategy, Chairman Antonio Horta-Osorio told Swiss newspaper NZZ am Sonntag, adding that the group would also revise its executive compensation system to reduce risk.

“We are in close contact with our shareholders – in particular the six largest, who together hold around 30% of the capital,” Horta-Osorio told the newspaper in an article published on Sunday.

“We believe we understand their priorities and that they fully support our strategy.”

Credit Suisse on Thursday announced a restructuring, saying it would curb its investment bankers and put money into wealth management as it tries to curb a freewheeling culture that has cost it billions in a series of scandals. Read more

Horta-Osorio, who joined Lloyds Bank in April, said he puts risk management and accountability at the heart of the operations of Switzerland’s second-largest lender.

Harris Associates, Credit Suisse’s largest shareholder with a 4.9% stake according to Refinitiv data, backed the strategy, in a separate interview also released on Sunday.

“What is now being announced should have happened in the last 10 years: reducing risks, strengthening controls and at the same time preserving the entrepreneurial spirit,” David Herro, partner of the asset manager, told SonntagsZeitung. American.

“There has been a clear lack of risk control over the past 10 years. However, risk management only works if a culture change is successful and you have the right people for it. The new president understands the risk and the bank, which he did not. with the former president. “

Herro said he believes chief executive Thomas Gottstein has the right skills to lead the bank’s turnaround, “especially when he’s surrounded by the right people.”

The investor said he was not unduly concerned about the market’s reaction to the new strategy, with Credit Suisse shares falling more than 5% on Thursday after the announcement, which analysts said no was not daring enough.

Herro said the focus should be on creating long-term value rather than short-term price movements. Currently, Credit Suisse is trading at around 50% of its book value, below rivals like UBS (UBSG.S), but Herro has said he could recover.

“If Credit Suisse manages to generate sustainable cash flow with asset management and investment banking, I see no reason why the bank should not be valued at one and a half or even two times its value. book value, ”he said.

According to a study published in July, a “lackadaisique” attitude towards risk and a “lack of responsibility” are at the origin of the loss of 5.5 billion dollars of the bank on the investment fund Archegos. Read more

Changing the compensation system was a factor in ensuring cultural change, Herro told SonntagsZeitung, an issue also addressed by Horta-Osorio.

The bank is also adjusting its compensation model to reduce risk, the chairman said in his joint interview with CEO Gottstein, and will present details in the first half of 2022.

“We will link wages more closely to risks taken and to economic gain,” Horta-Osorio told NZZ am Sonntag. “This means that if a business is capital intensive and therefore generates profits, executives are not rewarded with higher bonuses.”

($ 1 = 0.9120 Swiss francs)

Reporting by John Revill; Editing by Susan Fenton

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