Credit Suisse’s New Chairman Sends Chill Through Investment Bank

(Bloomberg) -- Credit Suisse Group AG investment bankers expecting new Chairman Antonio Horta-Osorio to boost their spirits after an exodus of top talent were left disappointed during a recent meeting in London.

The former Lloyds Banking Group Plc chief executive officer, in response to questions, told bankers who’d gathered in person and virtually for the event that the firm had a great wealth management business “with ancillary services,” according to several people who heard the remarks.

For some top dealmakers and traders, those words were perceived as a blow, the people said. The investment bank delivers more revenue than any other division at the firm and ranks in the top 10 globally.

Horta-Osorio’s comment could mean more than just a few hurt egos. At the annual general meeting in April he’d already criticized the bank’s role in the Archegos Capital Management and Greensill scandals, pledging to take his time on a broad strategic review of the business. That’s put Credit Suisse bankers across the firm on high alert as they closely parse his words for clues about his plans for the firm -- and their own futures.

Credit Suisse declined to comment.

Credit Suisse’s New Chairman Signals Possible Shakeup After Woes

While Horta-Osorio surveys the options, dozens of key rainmakers have already voted with their feet, departing for Wall Street rivals after the Archegos hit ravaged stock-based pay. Before the $5.5 billion loss, the investment bank had been resurgent, profiting from advisory and trading opportunities. Now, Credit Suisse is already paring back its hedge fund unit and cutting ties with clients, prompting speculation bigger changes are on the way.

More than 50 front office employees have left since the most recent troubles began on March 1, as competitors view Switzerland’s second-largest bank as fertile hunting ground for talent that otherwise would be hard to poach. These include at least 20 managing directors in key roles in the securities unit. The defections were to rivals including Citigroup Inc., JPMorgan Chase & Co. and Jefferies Financial Group Inc.

Credit Suisse Loses M&A Head Weinberger to Morgan Stanley

Known for reviving Lloyds after the British lender took a bailout, Horta-Osorio has brought a direct manner to Credit Suisse that’s earned him both criticism and admiration after his first few months in charge, people with knowledge of the matter said. Some say his blunt approach is what the bank needs and appreciate he’s taken time to walk the floors of the bank’s global offices including New York, Paris, and London and holding town halls.

At a meeting in New York, Horta-Osorio told investment bankers that his strategy review of the bank would take time and that he was coming in with an open mind, urging them to stay focused on clients while they awaited any changes, according to a person familiar with those remarks.

For many of the firm’s investment bankers, the Archegos hit was particularly painful because it overshadowed one of the best periods for the business in years, driven by a trading boom, leveraged finance deals and the surge in SPACs. Only Japan’s Nomura Holdings Inc. came anywhere close to sustaining the same level of damage from Archegos, with a hit of almost $3 billion.

With deal-making and trading conditions still favorable, other banks have swooped in to scoop up talent. That’s pushed Credit Suisse to offer retention bonuses to some standout managing directors and other senior staff in an attempt to stem the departures, people familiar with the matter said.

Credit Suisse Offers Top Bankers Bonuses to Stay After Scandals

For more experienced hands at the investment bank, Horta-Osorio’s comments don’t sound like a dramatic change. Former CEO Tidjane Thiam had followed in the footsteps of larger peer UBS Group AG in focusing the bank more on the steady growing income from providing services to the world’s wealthy, pivoting away from the volatile earnings of trading and dealmaking. The bank has been reducing the amount of capital it puts toward its investment bank, and compensation ended last year lower than 2016 levels.

©2021 Bloomberg L.P.