Credit Suisse chair Urs Rohner (right) and CEO Tidjane Thiam in Zurich, Switzerland. Picture: REUTERS/ARND WIEGMANN
Credit Suisse chair Urs Rohner (right) and CEO Tidjane Thiam in Zurich, Switzerland. Picture: REUTERS/ARND WIEGMANN

Zurich  — The balance of power at the top of Credit Suisse is shifting in favour of Tidjane Thiam after key shareholders came out to back the CEO in a clash with chair Urs Rohner.

After a week in which Harris Associates’ David Herro stepped up his rhetoric against any plan to oust Thiam, a second major shareholder entered the fray. Silchester International Investors, a secretive UK investment firm, signalled there should be no change of CEO and joined Herro in demanding that Rohner should step down early if he refuses to back Thiam.

The comments suggest the CEO is gaining the upper hand in a dispute with Rohner ahead of a board meeting on Thursday that is set to discuss his future and pay.

The troubles started in September when it emerged that the bank spied on star banker Iqbal Khan after he announced he was joining rival UBS Group

Tensions between the two men escalated after a recent spying scandal that dented the bank’s reputation and prompted difficult questions about the culture at the top of the firm. Thiam was cleared, a close lieutenant of his took the fall, and the bank has struggled to move beyond the scandal after more cases surfaced.

Tensions between the CEO and the chair have been mounting, and Rohner was preparing a list of possible successors to Thiam, Bloomberg reported on Friday, citing people familiar with the matter. He denied the story, while the bank declined to comment.

Rohner is “trying to push Mr  Thiam out of his role”, Herro, who helps oversee the stake of one of Credit Suisse’s top shareholders as chief investment officer for international equities at Harris Associates, said in an interview with news website The Market. If the board does not “act accordingly”, he said he plans to look for other ways to remove Rohner.

Credit Suisse declined to comment and said Rohner was not available to comment.

Moody’s Investors Service is looking for signs of a credible medium-term vision for SA and said it was "a bit early" to judge the government’s policy and structural reforms after changing its outlook on the country’s credit ratings to negative almost three months ago.

"It is relatively fresh, our negative outlook," Lucie Villa, Moody’s vice-president and lead sovereign analyst for SA, said on the sidelines of a conference in London on Tuesday. Economic growth data is "not pointing to a positive or a particularly negative direction. There is nothing really to flag for the time being."

The ratings agency cut the outlook for SA’s Baa3 foreign- and local-currency assessments to negative on November 1. That brought the economy to the brink of a full-house of junk credit ratings, after finance minister Tito Mboweni presented a deteriorating outlook in his medium-term budget policy statement. Gross government debt will surge to 80.9% of GDP in the 2028 fiscal year unless urgent action is taken.

Moody’s will look to the February 26 budget review for details on how the government will contain spending and bolster revenue, Villa said. While Mboweni was redoubling efforts to cut the state’s payroll costs, which make up 35.4% of national spending, the current three-year agreement may be difficult to change, she said. "The big question for me is on the tax revenue side, because there has been more than a year that they have been trying to improve tax compliance," she said. "I believe there is potential there."

Economists, including Absa’s Peter Worthington and Miyelani Maluleke, expect the value-added tax rate to be hiked to
16% from 15% in the budget, adding R35bn to the fiscus in 2020/2021.

While the government is forging ahead with plans to split loss-making power utility Eskom into three units under the guidance of new CEO André de Ruyter, Moody’s says its rating signals the company’s financial position is deteriorating, raising the need for the government to step in again. "We believe that the government is going to be the last resort capital provider and the taxpayer will be the one still paying," Villa said.

While some analysts expect a downgrade to junk on March 27, when Moody’s is next scheduled to assess SA, Villa said the date was tentative. "The outlook is negative, so what we are flagging is not a necessarily immediate downgrade," she said.

A downgrade will see SA without any investment-grade ranking for the first time in 25 years. That would cause it to
fall out of the FTSE World Government Bond index, which could prompt a sell-off and outflows of as much as $15bn, according to Bank of New York Mellon. Bloomberg

Herro has emerged as a key defender of the CEO as the scandal unfolded, praising Thiam for turning the bank about while playing down the decision to spy on a former employee. He said in an interview with Bloomberg TV this week that there appears to be an orchestrated attempt to “pin something” on the CEO and suggested it may be motivated by envy or the fact that Thiam is the first black CEO at the Swiss bank.

Shareholder Eminence Capital is also backing Thiam and has written to the bank’s nonexecutive directors to warn them against taking any action against the Thiam, according to a person familiar with the matter. The New York-based firm, which runs long-short and long-only funds, also came out in support of the CEO at a critical juncture four months ago.

Shares of Credit Suisse rose, trading as much as 2.2% higher and up 1.6% at 3.06pm in Zurich. The stock is down by almost half since Thiam took over in mid-2015, after he tapped shareholders for fresh capital.

The troubles started in September when it emerged that the bank spied on star banker Iqbal Khan after he announced he was joining rival UBS Group. The details that emerged in the wake of the scandal, including a personal falling-out between the two executives earlier that year and the suicide of a contractor, rattled business circles in Zurich, which normally enjoys a reputation for quiet professionalism.

An internal probe by the bank concluded Thiam did not know about the spying, and that COO Pierre-Olivier Bouee was responsible. Bouee was fired late in 2019. It soon emerged that human resources chief Peter Goerke was also followed, which the bank also blamed on Bouee.

‘Terrible mistake’

A third case, involving a former Credit Suisse employee in the US who claims she was spied on a couple of years before, was also probed and rejected by the bank. However, lawyers for Credit Suisse still looked into the matter as recently as past week, Bloomberg reported on Tuesday.

Late on Tuesday night Thiam posted a picture on Instagram of himself surrounded by his executive board, in an apparent show of support for their embattled boss.

Herro, meanwhile, sent a letter to the board of Credit Suisse saying it would be a “terrible mistake” to replace Thiam and calling for members to express support for the CEO “clearly and publicly”, he said.

Harris Associates holds 8.42% of Credit Suisse shares, Herro said. The firm is controlled by French investment bank Natixis. Other top investors include the Qatar Investment Authority, which held a 5.2% stake at the end of 2018, the most recent data available, according to data compiled by Bloomberg.

Bloomberg 

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