Credit Suisse needs to strengthen board

[ZURICH] Credit Suisse Group AG needs to strengthen its board of directors after Switzerland's second-largest bank disclosed almost US$1 billion of writedowns linked to illiquid positions, David Herro, chief investment officer at Harris Associates, told Finanz und Wirtschaft.

"Apparently there was a problem within the bank," Mr Herro told the Swiss newspaper in the interview published on Wednesday. "That shows that there's probably a need to strengthen the board. Within a complicated financial institute such as Credit Suisse, there's a need for people on the board that understand the business and make sure that there are no more such blunders."

Credit Suisse posted a bigger-than-expected loss in the fourth quarter as a result of US$633 million in writedowns on mainly distressed credit and securitized pools of risky loans, which caught the top management off guard. As of March 11, it was projecting further writedowns of US$346 million that, combined with a downturn in global markets that has depressed trading revenue, will probably wipe out first-quarter profit, chief executive officer Tidjane Thiam said last month.

Harris Associates, based in Chicago, has held Credit Suisse shares for more than a decade. It owned "just over" 8.5 per cent of the Swiss lender in February, Mr Herro said at the time.

Chairman Urs Rohner told Bilanz magazine in an interview published earlier this month that he's spoken with most of the lender's largest shareholders and that they support its management and strategy. Credit Suisse is scheduled to hold its annual general meeting on April 29.

The bank proposed Alexander Gut and Joaquin Ribeiro to join as non-executive board members at the AGM. Both have "extensive experience in global banking," Credit Suisse said in the agenda for the meeting published last month. Sebastian Thrun will take on a new role within the bank and won't stand for re-election to the board.

Mr Gut holds a PhD in Business Administration from the University of Zurich and worked for KPMG and Ernst & Young. Mr Ribeiro, who holds an MBA in Finance from New York University, is vice-chairman of Deloitte LLP (USA) and chairman of the company's global financial services industry practice, according to information on Credit Suisse's website.

The shares have lost about 36 per cent of their value this year, with Mr Thiam announcing a second round of restructuring measures last month to deepen cuts at the investment bank and shore up profitability. The new CEO is "taking the right measures," using "the resources where they achieve the biggest returns over a cycle," Mr Herro said.

"Through this restructuring, the risks in investment banking will be diminished and the freed-up capital used to accelerate an expansion in wealth management," Mr Herro told the newspaper. "They should already have implemented this strategy two or three years ago."

Credit Suisse rose 3.9 per cent to 13.94 Swiss francs at 10:47 am in Zurich. The bank will report first-quarter results next month.

BLOOMBERG