Credit Suisse’s biggest shareholder is to urge the bank’s management to consider elements of an activist investor break-up plan, including the idea of shifting the domicile of the group’s investment banking arm from Switzerland to the US.
Harris Associates, which owns 9 per cent of Credit Suisse, believes the thrust of the activist plan, put forward by RBR Capital Advisors, has little merit, but David Herro, Harris’s international chief investment officer, told the Financial Times that RBR’s proposal “does have some points that require a second thought”.
The Financial Times reported on Monday that RBR, a small Swiss hedge fund, had acquired a stake of about 0.3 per cent in Credit Suisse and was gearing up to launch an activist campaign to break the bank into three.
The reaction to the idea on Tuesday was largely hostile. Analysts criticised the restructuring proposals as impractical and potentially costly and said the valuation projections were unrealistic. RBR believes that splitting Credit Suisse into a core wealth management cum retail banking unit, an investment banking entity, and an asset manager could create businesses with an aggregate value of SFr80bn, double the bank’s current market capitalisation.
Credit Suisse stock closed up just over 1 per cent on Tuesday. “If the market thought this had legs, the stock would have risen 6-8 per cent,” said one person close to the bank.
Mr Herro, who worked alongside RBR when it launched an activist campaign against the Gategroup catering business, said: “I don’t really think there’s a lot of merit [in the break-up plan]. From a practical perspective it would be very difficult. We would just prefer to see management execute the plan that they’ve developed. I don’t think the company needs to be broken up to achieve a higher valuation.”
But he said that Tidjane Thiam, Credit Suisse’s chief executive, should not dismiss the proposal out of hand. In particular, Mr Herro said: “Some things . . . like redomiciling the investment bank to a more friendly region, where the capital requirements aren’t so stringent, where the regulatory requirements aren’t so stringent, some of these things management should be taking a look at.”
The comments, made in the FT’s Banking Weekly podcast, may give heart to RBR and Rudolf Bohli, its fiery chief, who is due to unveil the full details of his plan this week at JPMorgan’s so-called Robin Hood conference in New York.
RBR believes that moving the investment bank out of Switzerland, where it is subject to high regulatory capital surcharges, could save nearly SFr16bn, or more than half of its current capital requirement.
The break-up plan is supported by Gaël de Boissard, a former Credit Suisse investment bank co-head who was a contender for the chief executive job when Mr Thiam was appointed.
Credit Suisse’s shares sit at barely half what they were when Mr Thiam took over in 2015, but they have outperformed most European peers over the past year. The bank is two years into a three-year restructuring plan designed to cut costs, trim its investment bank and expand in growth areas, such as Asia and wealth management.