Credit Suisse plunges into fresh chaos with chairman's ouster

[ZURICH] The banker tasked with fixing Credit Suisse Group AG was ousted just 9 months into the job for breaching Covid quarantine rules, throwing the Swiss financial giant into fresh turmoil as it struggles to emerge from a series of scandals.

Antonio Horta-Osorio's departure, unveiled in a surprise midnight announcement on Monday (Jan 17), brings an abrupt end to the tenure of a turnaround specialist who promised to instill a culture of personal responsibility at the bank after its most turbulent year since the financial crisis.

He was replaced as chairman by Axel P. Lehmann, a Credit Suisse board member who oversees the risk committee but is little known outside Zurich.

Horta-Osorio, who received a British knighthood after reviving Lloyds Banking Group, is leaving after breaching quarantine rules, underscoring the growing pressure on business, political and even sporting elites who bypass protocols. For the Swiss bank, the timing could hardly be worse after it counted on the Portugese banker to guide it past the collapses of Greensill Capital and Archegos Capital Management and to bring much-needed stability at the top after a series of high-profile departures.

Even before news of his quarantine breaches began emerging last month, Horta-Osorio's leadership had received mixed reviews within Credit Suisse. Some executives who spoke on condition of anonymity before the ouster said the 57-year-old's blunt approach was what the bank needed and appreciated his walking trading floors from New York to London and Paris.

Others described him as divisive. For Lehmann and Credit Suisse chief executive officer Thomas Gottstein, the challenge will be reviving confidence among employees and investors after a steady exodus of talent and a 23 per cent tumble in the bank's stock over the past year.

Horta-Osorio was widely seen as the architect of the bank's strategic shift late last year to move resources away from the investment bank to wealth management, including an exit from the prime brokerage business at the heart of the Archegos blowup.

"This is about personal responsibility in the professional context," said Sven Feldmann, associate dean at the Melbourne Business School. "Thinking that the chairman is above the law would have sent a wrong signal throughout the bank. By stepping down, the bank is showing it has zero tolerance for breaking the rules and is serious with implementing a culture change."

Credit Suisse said last month that Horta-Osorio breached quarantine rules by leaving Switzerland before his period of mandated isolation was over. Reuters later reported that the financier had attended the Wimbledon tennis finals in London in early July, a time when arrivals from Europe were obliged to undergo quarantine.

His departure followed an investigation commissioned by Credit Suisse's board, the bank said on Monday. "I regret that a number of my personal actions have led to difficulties for the bank and compromised my ability to represent the bank internally and externally," Horta-Osorio said in the statement. "I therefore believe that my resignation is in the interest of the bank and its stakeholders at this crucial time."

Horta-Osorio joined Credit Suisse in April. The banker's supporters have included major Credit Suisse shareholders such as David Herro of Harris Associates. "I am very, very gratified that the person at the top of the organisation is extremely capable and has a good understanding of risk," Herro told Bloomberg TV in October.

At the same time, Credit Suisse's stock has languished under Horta-Osorio and his leadership style has grated with some. While Horta-Osorio's 6 -month strategy review resulted a simplified structure and the bank's exit from the hedge fund business at the heart of the Archegos scandal, he stopped short of the radical changes that characterised Deutsche Bank's overhaul 3 years earlier. Credit Suisse's stock has trailed global peers since the overhaul plan was announced in November. Speculation about possible M&A has ensued.