Credit Suisse is reportedly weighing the replacement of high-profile executives, including its risk chief, following Greensill and Archegos crisesApril 4, 2021
- Credit Suisse’s risk chief Lara Warner is at risk of being replaced, Bloomberg reported.
- The role of Brian Chin, CEO of its investment bank, is also reportedly under scrutiny.
- Credit Suisse has been involved in both the Archegos and Greensill crashes.
- See more stories on Insider’s business page.
Leaders at Switzerland-based Credit Suisse are discussing replacing chief risk officer Lara Warner, after the bank was caught up in several high-profile incidents, leading to large potential losses, Bloomberg reported. The outlet cited people briefed on the matter.
Despite chief executive officer Thomas Gottstein’s commitment to a clean slate in 2021, after a previous spying scandal at the bank, Credit Suisse has been one of the worst-performing major bank stocks in 2021.
The recent collapse of Greensill, along with chaos at Archegos, has potentially left investors facing another quarter of losses.
The role of Brian Chin, CEO of Credit Suisse’s investment bank, is also under scrutiny, two of the sources told Bloomberg. They added that the bank is planning a review of its prime brokerage business, which is housed under its investment bank.
Credit Suisse declined to comment.
The bank was one of the main lenders to the Softbank-backed Greensill, a supply-chain lender that was recently forced to file for bankruptcy. A $140 million collateralized loan to Greensill is now in default, although $50 million has been recently repaid by administrators, Bloomberg reported.
This is essentially pooled debt that is taken to market via a single security. Investors receive scheduled payments from the loans but assume most of the risk in the event that borrowers default.
The Swiss bank’s asset management unit also ran a $10 billion group of funds with Greensill, which are being wound down.
On Monday, the Swiss firm had $4.8 billion wiped from its market capitalization on Monday. Its shares tumbled as much as 14% when the bank warned it could suffer a major blow to its first-quarter profits after Archegos, a US-based hedge fund liquidated.
It said the losses could be “highly significant and material” to its first-quarter earnings, due next month.
Archegos, the family office of trader Bill Hwang, was forced to liquidate more than $20 billion of leveraged equity positions last week. The fire sale hammered stocks such as ViacomCBS and Baidu, and set off alarms at multiple Wall Street banks.
The bank could face a loss of $3 billion to $4 billion, the Financial Times reported, citing two sources. The top end of that estimate would be almost triple its net income in the first quarter of 2020. From the Archegos trades, the banking sector could take a collective hit of up to $10 billion, JPMorgan analysts have estimated.
Bloomberg noted that this is only adding to the scrutiny on management, after several other miscues at the investment bank and beyond, including exposure to the Luckin Coffee Inc. fraud.
Gottstein is expected to remain CEO, the people told Bloomberg.
The latest issues for the bank could also put its planned share buyback at risk, potentially pausing it for a second time, Bloomberg reported, as losses could threaten the bank’s dividend distribution.
Credit Suisse declined to comment on the potential fallout of the trades.
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