Lamenting the desolate state of Credit Suisse is not enough. The situation begs the question of what options the bank on Paradeplatz still has. What can the duo Axel Lehmann and Ulrich Koerner do to put CS back on the road to success?
Numerous small investors who thought they were being particularly clever over the past two months eagerly buying shares in beleaguered Credit Suisse are now feeling the pain.
Instead of having bought at a historic low, they are seeing the needle not moving on the price of the shares. In all likelihood, they will have to brace themselves for an even longer lean period.
Lack of Creditability
This is true especially after Credit Suisse once again came up with bad news yesterday. Switzerland's second-largest bank is threatened with further losses, customers are withdrawing their deposits, and it remains unclear how the company intends to earn money in the future. Even among some of its most ardent supporters in Zurich's financial community, people are beginning to worry whether Credit Suisse can turn the corner.
For the time being, there is nothing to suggest that it will, even with lavish amounts of money flowing in from the Arab world flowing in, something many are not entirely comfortable with. Even in high finance, money alone is not enough. One has to ask whether Credit Suisse still has enough of what makes up part of its name: credit. At the close of trading Wednesday, shares closed at 3.62 francs, slightly above the year's low of 3.52 francs.
What Options Remain?
Continuing to lament the desolate state of the bank is hardly productive. The question is what options it still has. What magic can the duo of Axel Lehmann and Ulrich Koerner pull out of their hats to put Credit Suisse back on the road to success?
Against the background, the company is now in danger of falling behind in important industry developments and changes because it is still so absorbed in dealing with legacy issues. So what can be salvaged and preserved?
1. A Swiss bank Forgotten
Since the entry of the Saudi National Bank, Arab investors, together with the former Qataris, hold a quarter of Credit Suisse. If the former SKA (Schweizerische Kreditanstalt) wants to continue to pass itself off as a Swiss bank, it needs to return to its roots as soon as possible, if that is indeed still an option.
UBS also faced a reputational crisis 14 years ago but managed to put together a deal with Switzerland Tourism and re-emphasize its Swiss origins in various promotional campaigns. It published a hiking guide and invited people to take boat trips. It worked, and no one finds fault with UBS's international shareholder base.
It is now paramount for Credit Suisse to play its Swissness. With Roger Federer, it already has one of the best Swiss brand ambassadors.
2. Culture According to the Motto: As Long as it Makes Money
Neither Koerner nor Lehmann have commented on Credit Suisse culture in recent weeks. This raises the question as to how much Swissness there is left in the bank, especially since the Swiss private bank was built on Swiss values.
Recently, the answer to that question turned out to be negative, as lawyer Monika Roth recently said in an interview with the «Neue Zürcher Zeitung». She said in the bank's international business, a different set of rules seems to apply, with a culture different from the Swiss unit. In Switzerland, the smallest infractions are punished, but international asset management, as long as it makes money, can get away with more.
A lawyer who has often been on the opposite side of the bank perceived a culture of arrogance at Credit Suisse that is very company-specific. «It's well known that Credit Suisse consistently did not sign a waiver of the statute of litigation limitations until 2021. It dragged out litigation until the other side ran out of money or gave up in resignation,» Roth said.
Given that, Lehmann and Koerner should know where to start within their company. So far, no one has expressed this more clearly than Roth.
3. Allegedly An Entrepreneurial Bank
Credit Suisse is an entrepreneurial bank in its origins since its founding by Alfred Escher, one of Switzerland's greatest entrepreneurs. For a long time, it remained so. But with its wayward course in recent years, it gambled away an enormous amount of credibility, especially in the entrepreneurial world. When it invokes entrepreneurship today, it is a platitude at best.
Yet in its DNA it is an entrepreneurial bank. If it succeeds in winning over some great entrepreneurs from Switzerland and abroad, it will have gone a long way toward rehabilitating the company.
4. Wealth Management. The Core Business
At a recent Investors' Day in London, Credit Suisse meant well but handled things awkwardly. Of course, it was important to eliminate the legacy issues and identify and spin off potential crisis areas. But that is by no means the end of the story. What it failed to do was to look ahead, especially in its core discipline of asset management.
The bank owed everyone a vision of how it will earn money in the future. Blanket commitments to the richest people in the world are not enough to derive an innovative business model. It is particularly revealing that Francesco De Ferrari so far has hardly been involved externally in Credit Suisse's new start, especially since he is the head of the flagship wealth management division.
The ideas and innovations on how Credit Suisse can maintain its position as one of the world's leading wealth managers in the future should emanate from him. But so far, that has not happened. Why?
5. Digitization - Is There Still Something Going on?
It is debatable whether digitization, the current buzzword in the financial world, is a differentiating enough feature for a bank or merely a commodity for everything that is built from it. In the case of Credit Suisse, digitization would be an effective lever to distinguish itself as an innovative financial institution of today.
But that failed to materialize, at least since the launch of the CSX app. Even though the bank has a well-known expert in this field at the helm of its technology division in the person of Joanne Hannaford. In a recent interview with finews.asia, she revealed, among other things, that Credit Suisse had already developed a type of metaverse internally.
Just such news would be worth its weight in gold to stimulate investors' share price imagination. Instead, Credit Suisse is currently in danger of being digitally irrelevant.
6. Crypto Positioning - Now!
Trading countercyclically is an option in the financial world. Value investor Warren Buffett never tires of preaching to invest in assets widely spurned at any given time.
So why doesn't Credit Suisse also position itself as a crypto bank offering a suite of services in this environment and take a pioneering role in blockchain technology? The know-how is certainly there, and the bank could appeal to an entirely new clientele, among whom are quite a few entrepreneurs, indeed many high-net-worth individuals (HNWIs) of tomorrow.
7. A Duo Furioso and What Else?
It may well be that Credit Suisse's biggest problem is highly mundane and the fact the bank's restructuring is based on two less than charismatic individuals in Lehmann and Koerner, both admittedly seasoned bank managers. But that alone is no longer enough in today's world. It is rather surprising that the entire launch of the «new Credit Suisse» is so focused on two individuals. It contradicts all contemporary management principles, which are to put the team first.
So far, only Lehmann and Koerner have been mentioned. But what are the other members of the Group Executive Board doing? Isn't it time to focus on them as well, especially since Credit Suisse has replaced more or less the entire staff on the executive floor within a year and is now supposedly staffed without exception with absolute experts? Investors want to hear more than just the assurances of two lone warriors who are not entrusted with the big change.
