There is no substance to Credit Suisse chairman António Horta-Osório and chief executive Thomas Gottstein's squabbles. They need each other for better or worse.
Credit Suisse head Thomas Gottstein would have been prepared to take the fall for the Greensill fund losses and empty his seat after the debacle became public in early Spring 2021. The board of directors, then headed by Urs Rohner, energetically rejected that option, research by finews.com indicates. Following that, António Horta-Osório assumed the chairmanship at the end of April but he has since decided to keep him on. Likely that is because of the complexity of the current situation and the overall circumstances the bank finds itself in.
Still, against the overall background, there has been speculation that Gottstein's position as CEO is weaker than it was. But that is taking a superficial view. The truth is that both executives need each other. Horta-Osório needs someone like Gottstein who fully gets the internal processes and culture and has mastered the ins and outs of the wealth management and investment banking businesses.
Clearly More Decisive
Despite having impressive credentials, Horta-Osório has never really worked to any great extent in wealth management and his stints in investment banking-related sectors came early on in his career. His recent background at Lloyds is in commercial banking and retail. From that perspective, each of them complements each other with their expertise. Gottstein is also in a position to help Horta-Osório understand the Swiss way of thinking. Things like, for example, that a knighthood doesn't stand for much here.
Gottstein also needs Horta-Osório as he appears to be much more decisive than his predecessor Urs Rohner. And it is only with this kind of decisiveness that Credit Suisse will be able to be significant, although not radically, restructured, which is what internal sources seem to be indicating.
End of Regionalization
Horta-Osório is likely to take the same approach that UBS has and emphasize wealth management in the future. The investment bank is unlikely to be shrunk or divested. It simply won't be allowed to grow much. Credit Suisse also has to start functioning more broadly from a global perspective, after becoming strongly regionalized under the aegis of Gottstein's predecessor Tidjane Thiam. The best example of that is the Asia market region which operates as an independent organization headed by Helman Sitohang. That might make sense from a local perspective but it doesn't make as much sense from a global one, as it prompts unneeded costs and duplication. Besides, high net worth globally-minded clients shouldn't be talking to a different banker in each region.
In order to make all this happen, Horta-Osório needs a CEO that has worked in both areas extensively. That is the only way that it is possible for him to not deconstruct any critical investment banking pieces while growing wealth management. It is also clear that the restructuring is going to prompt the rolling of a few heads and that some members of executive management are going to lose their jobs. Gottstein's expertise will be needed to make the right decisions in combination with Horta-Osório's decisiveness.
Prelude to the Big Gamble
The changes are a prelude to the big gamble that Horta-Osório ostensibly has in mind. A merger with Deutsche Bank or Italy's Unicredit. That is the only way that Credit Suisse will not drift into the midfield in an international context over the long term. There are arguments for both. Although both squarely meet the target of fulfilling the bank's quasi-permanent jostling with UBS for first place. Such a merger would ensure that they clearly became so much larger than UBS that it would make it difficult for them to supersede the new merged entity anytime soon.
The same thing happened in 1998 when UBS was formed by the merger of Union Bank of Switzerland and Swiss Bank Corp and Credit Suisse was left in the dust for years afterward. Financial circles also talk about how UBS had been speaking to Deutsche Bank a couple of years back about a merger, although UBS's board of directors decided against it in the end. That was mainly because they were not sure if the then troubled Deutsche Bank still had a few nasty surprises up its sleeve.
That could look very different in two to three years. If Credit Suisse has managed to restore some confidence by then and appears to be functioning successfully, Deutsche Bank may also be on a surer and transparent business path.
Knowing Each Other
If Horta-Osório wants to go down in history as a great rejuvenator, he does not have that many options. The only question is what partner he intends to choose. It could be Unicredit, which is currently headed by former UBS Investment Banking head Andrea Orcel and who was once a contender to replace Sergio Ermotti at the top. His ego is still bruised by that affair and he might find a merger with Credit Suisse a way to exact a measure of revenge against his former employer.
Horta-Osório and Orcel know each other very well from their times together in London.
Unicredit would be a very complementary fit for Credit Suisse, given its strength in commercial banking, and its extensive Eastern European presence. Credit Suisse, with its strong base in Switzerland, in Asia and the U.S., is clearly ideal from that perspective. That Horta-Osório's and Orcel's wives are best friends will likely not prove to be much of a disadvantage when it comes to a merger.
Suspense Until November
Credit Suisse will have to present its strategy first. Horta-Osório has indicated this is likely to be before the end of the year in a number of interviews and statements. Concretely, it is likely to be during the third-quarter results in early November, at least what certain sparrows in the trees surrounding Zurich's banking circles seem to be tweeting. If he does that, Horta-Osório can also show that he is no procrastinator and that he took the reins at Credit Suisse to set a decisive footprint.
