Credit Suisse Key Shareholder Sells Entire Stake

creditsuisseharrisassociates mar06 lt

U.S. investment manager Harris Associates, once a major shareholder of Credit Suisse Group AG, has sold its entire stake in the Swiss banking major, the Financial Times reported. The investor ended its about two decades of ownership after raising questions about the future of the franchise.

Chicago-based Harris Associates, which reportedly owned as much as 10 percent of Credit Suisse's stock last year, sold its stake in the bank over the past few months.

FT quoted David Herro, deputy chair and chief investment officer at Harris as saying, "There is a question about the future of the franchise. There have been large outflows from wealth management."

He was referring to the 111 billion Swiss francs withdrawn by Credit Suisse customers in the final three months of 2022 following media speculation about the bank's financial health.

As per the report, Harris started the stake sale in October last year after the bank's fundraising, in which Saudi National Bank became the top investor.

Harris had initially bought Credit Suisse stake in 2002, and sold it all before the financial crisis in 2008. It bought back the stake during 2009, and by May 2012, Harris owned 37 million shares in the group.

Credit Suisse had been going through various struggles over the years, and the last- reported profit was in its third quarter of fiscal 2021. Since then, it has been reporting losses including all quarters of fiscal 2022 mainly hit by weakness in Investment Bank amid the more challenging economic and market environment.

The Swiss lender recorded a narrower net loss of 1.39 billion francs in its recent fourth quarter, but a significantly wider net loss of 7.3 billion francs fiscal 2022 amid drop in client activity across all divisions, significantly affected by the challenging macro and geopolitical environment with market uncertainty and client risk aversion.

Assets under Management or AuM also declined significantly, and the company said it sees substantial loss before taxes in fiscal 2023.

The outlook reflects the adverse revenue impact from the previously disclosed exit from non-core businesses and exposures as well as, in particular restructuring charges related to cost transformation.

Amid the issues, Credit Suisse has been undertaking restructuring, which includes plan to spin off its investment bank and to strengthen its wealth management business.

According to Herro, Credit Suisse's plan to restructure the investment bank, while a noble cause, is cumbersome and far more costly in terms of cash burn than expected. The investor also were not satisfied with the proceeds from the sale of securitised products.

Harris also holds stake in many other European financial institutions, such as Lloyds Banking Group, Intesa Sanpaolo, BNP Paribas, Julius Baer and German insurer Allianz.

FT reported that Artisan Partners, which last year was a top-five shareholder in the bank, has completely sold out over the past six months, and shareholder Dodge & Cox, a U.S. asset manager, reduced its stake in the bank.

Saudi National Bank is now the largest shareholder of Credit Suisse with a 10% stake, followed by the Qatar Investment Authority with a 7 percent stake.

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