RBR courts fellow investors for Credit Suisse break-up
Zurich — Activist investor RBR Capital Advisors sought to rally support for a campaign to break up Credit Suisse on Tuesday, hoping to capitalise on unrest after Switzerland’s second-largest bank lost about a quarter of its value since 2015.
However, the Swiss hedge fund led by Rudolf Bohli, 48, has taken a stake of only about 0.2% in Credit Suisse and faces a steep challenge to muster the backing needed to succeed.
"This is like an ant trying to tackle an elephant," said Marc Halperin, fund manager at Federated Investors, a top-25 Credit Suisse shareholder, according to Thomson Reuters data.
The campaign comes about two years into Credit Suisse CE Tidjane Thiam’s three-year plan to focus on wealth management and rely less on investment banking.
RBR, which has been in contact with Credit Suisse’s management, wants to divide the company into an investment bank, an asset management group and a wealth manager accommodating the Zurich-based bank’s retail and corporate banking operations, an RBR spokesman said.
The strategy, which will be outlined at the JP Morgan Robin Hood Investor Conference in New York on Friday, could see the revival of the old First Boston brand, the name of the US investment bank Credit Suisse took control of in 1988.
Thiam’s restructure suffered an early blow when $1bn in trading losses prompted him to make even deeper cuts to the investment bank in early 2016.
With the value of the stock diluted by two capital raisings totalling around Sf10bn (R136.8bn), shareholders are still awaiting the fruits of the painful overhaul.
Although shares had gained almost 10% in 2017, the performance reflected only a partial rebound from a feeble 2016 where they fell nearly a third.
Halperin said Credit Suisse management had done a "pretty good job". While he was prepared to be patient with them, he could support RBR if they had a better plan to bolster the share price, which remained cheap.
"We certainly think this thing is worth 70% to 100% more than where it is trading at," he said. "I would say at least the mid-20s is probably fair value."
RBR, partly named after Bohli, was set up in 2003 as a boutique Swiss hedge fund and has around Sf250m in assets under management.
Based in the small lakeside town of Kuensnacht, near Zurich, it rose to prominence through high-profile but ultimately unsuccessful activist campaigns against asset manager GAM in 2016 and airline catering company Gategroup in 2016.
Although RBR’s stake is relatively small — it has spent about Sf100m to build up its stake compared to Credit Suisse’s market capitalisation of Sf39.6bn — it said it has signed nondisclosure agreements with about 100 other investors, including some shareholders in Credit Suisse.
RBR has also recruited Gael de Boissard, a former Credit Suisse investment bank co-head who left the bank in Thiam’s restructure, to support its campaign, news of which was first reported by the Financial Times.
Credit Suisse said on Tuesday it remained focused on its strategy.
"While we welcome the views of all our shareholders, our focus is on the implementation of our strategy and of our three-year plan, which is well on track and which we believe will unlock considerable value for our clients and shareholders," a Credit Suisse spokesman said.
A source familiar with the investor meetings said Credit Suisse officials had met RBR several times about its suggestions and that the fund had alerted the bank on Friday that it would go public with its campaign.
RBR’s is the second activist investor campaign involving a big Swiss bank in recent years after Knight Vinke unsuccessfully pushed for UBS to make more drastic cuts to its investment bank.
Credit Suisse has argued keeping an investment bank is vital to cater for the more sophisticated needs of wealth management clients whose assets stretch into the billions of dollars.
But while analysts doubted Bohli’s break-up plan would gain the necessary traction with other investors, some suggested Credit Suisse could still pare back its investment bank even further.
"You have a comparative advantage in the market if you have a private banking and investment banking business," said Mirabaud Securities Limited analyst Andreas Brun, who rates Credit Suisse’s stock "buy".
"But you could do it with a smaller investment banking unit than what Credit Suisse has."