Published by The Straits Times – 4th April 2017
ZURICH • Just when he thought the worst was behind him, Mr Tidjane Thiam is facing another potential blow to a turnaround plan that is less than two years old.
Mr Thiam’s Credit Suisse Group last Friday found itself embroiled in a tax-evasion and money-laundering investigation spanning five countries that could involve thousands of account holders.
It is the latest headache for a chief executive officer who may have to ask shareholders for a third capital increase in five years as the banking group tries to recover from legacy issues and surprise trading losses.
Mr Thiam is considering selling shares or pursuing a partial initial public offering of the firm’s Swiss unit as he tries to free up capital to expand wealth management in Asia while shrinking the investment bank.
The CEO, who said in February that Credit Suisse’s US$5.3 billion (S$7.4 billion) settlement with the US over sales of toxic mortgage debt was a “game changer”, now faces the possibility of renewed uncertainty about the bank’s legacy issues.
“The problem for Credit Suisse is that they seem to be in the dark and have no idea what will result from this,” said Macquarie Group analyst Piers Brown, who has an underperform rating on the stock. “The two things that people are fearing is a big fine and that this prompts another wave of outflows from their European business as clients get fed up with the franchise.”
The bank said its offices in London, Paris and Amsterdam were “contacted” on Thursday by the authorities in relation to client tax matters, and that it is cooperating.
The bank repeated its “zero tolerance” approach in full-page advertisements taken out in UK newspapers on Sunday, giving a seven-bullet-point response to the probe. The bank added that it previously terminated relationships with clients who did not prove they paid their taxes, leading to “very significant asset outflows”.
The raids come as the bank is considering asking shareholders for more than 3 billion Swiss francs (S$4.2 billion) as an alternative to its longstanding plan to raise capital by listing part of its local unit, people familiar with the matter have said.
Credit Suisse shares fell 1.3 per cent to 14.71 francs yesterday morning in Zurich, while the Bloomberg Europe Banks Index was down 0.6 per cent. The bank’s shares have climbed 0.7 per cent this year.
