Former top Credit Suisse shareholder Harris Associates is selling the bank

One of Credit Suisse’s oldest shareholders has sold its entire stake in the scandal-hit Swiss bank after losing patience with its strategy amid continuing losses and a customer flight.

The US investment manager Harris Associates, whose Vice President and Chief Investment Officer David Herro was one of the most prominent supporters of the Swiss bank for years, owned up to 10 percent of Credit Suisse shares last year.

Harris began reducing its exposure in October following the bank’s SFr4 billion ($4.3 billion) fundraising when the Saudi National Bank ousted it as a top investor and had now divested itself entirely, Herro said the Financial Times.

“It begs the question of the future of the franchise. There have been big outflows from wealth management,” he said, citing the CHF111 billion withdrawn by Credit Suisse clients in the last three months of 2022, particularly after rumors about the financial health of the bank surfaced on social media.

“We have many other investment opportunities,” he added. “Rising interest rates mean many European financial stocks are moving in the other direction. Why go for something that burns capital when the rest of the sector is now generating it?”

Harris still owns stakes in several European financial institutions, including Lloyds Banking Group, Intesa Sanpaolo, BNP Paribas, Julius Baer and German insurer Allianz. She’s more confident about her prospects as rising interest rates boost her credit margins, profitability, and her ability to pay dividends and buy back shares.

Herro isn’t convinced Credit Suisse’s recent radical restructuring, which includes spinning off the investment bank and strengthening its wealth management business, can turn the tide of the 167-year-old lender.

Harris is particularly frustrated by the expense and lack of transparency of the investment banking spin-off deal with former board member Michael Klein – which will revitalize the First Boston brand name – and the agreement to sell the securitized products business to private equity group Apollo.

“We feel that the investment bank restructuring plan, while a noble cause, is cumbersome in terms of cash burn and far more costly than we anticipated,” Herro said. “We were also not satisfied with the proceeds. . . from the sale of securitized products.”

Credit Suisse said it was “ahead of our plan” and insisted it had “clear strategic goals,” adding, “We are focused on successfully executing our plan and meeting our goals to ensure that the new Credit Suisse will deliver sustainable value to all of our stakeholders.”

Credit Suisse last month reported a CHF7.3 billion loss for 2022, its second straight annual loss and the largest since the global financial crisis. The bank also signaled that there would be a “significant loss” this year.

Shares of the bank hit an all-time intraday low of SFr2.52 on Thursday after a spate of negative media reports about its efforts to retain staff and client assets. While ending the week at SFr2.78, the stock has fallen 77 percent over the past two years.

An active member of the share register, Herro struggled but failed to keep former CEO Tidjane Thiam and oust chairman Urs Rohner after the CEO was embroiled in a corporate espionage scandal in 2019.

Harris first bought Credit Suisse shares in 2002 for less than 30 francs and sold them for between 60 and 70 francs before the 2008 financial crisis, according to documents.

It bought back in 2009 when the price had fallen to around 23 SFr and saw a value opportunity. After initially rising to 56 francs, the share has been in a steady decline ever since.

As of May 2012, Harris owned 37 million shares of the group, which was worth just over 600 million francs at the time but would be worth 103 million francs today.

“It took a measurable toll on our performance,” Herro said. “You can’t win every time – that’s the business I’m in. We meet with every business we own, but you spend a lot more time with your problem kids. Credit Suisse has been a time and value waster for years.»

The two largest shareholders in Credit Suisse are now the Saudi National Bank, which took a 10 percent stake in last year’s capital increase, and the Qatar Investment Authority, which at the same time increased its stake to 7 percent.

Other US investors who have reduced their holdings include San Francisco-based $327 billion wealth manager Dodge & Cox, which held a peak of 5.11 percent of shares at the end of 2020, according to data filed. This is now 3.1 percent.

Artisan Partners, which was one of the top five shareholders last year and was bought into the group shortly after former chairman António Horta-Osório was appointed, has sold itself out entirely in the last six months.