Credit Suisse forced to set aside ANOTHER £566m for legal costs as it fights to salvage its reputation
Credit Suisse’s woes just keep on coming. The troubled lender, which has been involved in a string of scandals, has now been forced to set aside another £566million to cover its ever-growing legal headaches.
First there was a spying episode, which culminated in a car chase across Zurich as a former Credit Suisse executive tried to evade a private investigator.
Then the bank’s chairman Urs Rohner was accused of perpetuating racist stereotypes at his 70th birthday party.
Credit Suisse, which has been involved in a string of scandals over the last few years, has now been forced to set aside another £566m to cover its ever-growing legal headaches
Not long after, Credit Suisse began haemorrhaging cash due to its connections with Greensill Capital and Archegos Capital, both of which collapsed.
And early this year new chairman Antonio Horta-Osorio, who was brought in to clean up the lender’s reputation, was ousted after breaking lockdown rules to attend Wimbledon.
Now, the increase to its legal war-chest will force Credit Suisse to book another loss for the first quarter of 2022, after it swung into the red at the end of 2021.
The latest setback comes as a further blow to investors. Shares in Credit Suisse have tanked 37 per cent since the start of 2021, falling another 1.8 per cent yesterday.
The bank said £485million of the latest provisions were due to ‘developments in previously disclosed legal matters, all of which originated more than a decade ago’.
It declined to reveal what these were, but just last month it lost a case against one of its former customers, Georgia’s ex-prime minister Bidzina Ivanishvili.
A Bermuda court ruled that Credit Suisse would have to pay Ivanishvili more than £383m, after one of the bank’s former employees took money out of his account to help fund a lavish lifestyle.
The gloom continued for Credit Suisse investors yesterday, as the bank said it would also take a £162million hit from setting aside more money to cope with souring loans as economic conditions worsen.
And it will book £283million of losses due to the fall in the share price of Allfunds Group, a business which it owns part of.
The only silver lining was that the hit caused by the collapse of Archegos, a hedge fund which Credit Suisse had lent heavily to, was £138million less severe than first thought. It lost around £4.2billion in the scandal. And the bank said it would also make £130million in ‘real estate gains’.
Early this year chairman Antonio Horta-Osorio, who was brought in to clean up the lender’s reputation, was ousted when it emerged he had broken lockdown rules to attend Wimbledon
But those gains are small consolation to shareholders. Over the past five years, the bank’s shares have slumped by 49 per cent, wiping around £14billion off its value. The lender is now facing an uphill slog to restore its tattered reputation.
Horta-Osorio, the former chief executive of Lloyds Bank, had been roped in for exactly that reason.
The Portuguese banker was seen as a safe pair of hands to restore Credit Suisse to its former glory.
But instead, Horta-Osorio ended up drawing yet more unwanted attention when it emerged that he had broken UK lockdown rules last summer.
Various political forces were at play when Horta-Osorio was ousted, the Mail understands.
The 58-year-old felt that factions within the bank had never been open to an outsider attempting to make his mark on the close-knit world of Swiss private banking.
Horta-Osorio has been replaced by Axel Lehmann, whose CV reads like a list of Switzerland’s top financial institutions. But he will have a tough time turning around Credit Suisse’s fortunes.
ISS and Glass Lewis – two influential advisory groups who help shareholders decide how they will vote at companies’ annual general meetings – have told investors to vote against a motion which may absolve top brass at the bank from their role in recent scandals such as Archegos and Greensill.
Glass Lewis said Credit Suisse had ‘suffered significant financial and reputational damages through its exposure to the default of the Archegos fund and the Greensill fund’, and told shareholders they ‘could reasonably hold the board and executives accountable for the identified deficiencies in the company’s risk and control framework’.
With those words ringing in their ears, Credit Suisse’s board will be bracing for next week’s annual meeting to be a bruising affair.