DBRS Morningstar Comments on the Departure of Credit Suisse's Chairman

DBRS Morningstar considers that the announcement by Credit Suisse Group AG (CSG, rated A (low), Negative Trend) that Antonio Horta-Osorio is stepping down as Chairman is another blow for the Group’s attempts to stabilise its reputation following a series of risk management failures. It has also been announced that the Board has appointed Axel Lehmann, a member of the Credit Suisse board and head of the Risk committee, as the new Chairman. Lehmann will be subsequently proposed as new Chairman in the upcoming Annual General Meeting which is taking place on April 29, 2022.

Horta-Osorio’s resignation was driven by his breaches of COVID quarantine rules during his tenure following an investigation commissioned by the Board. In DBRS Morningstar’s view, his resignation highlights the importance of a robust corporate culture and corporate governance framework, including management leading by example, both in and out of the workplace. The resignation comes at a time when the Group is in the process of restoring investor and shareholder confidence after the significant risk management failures that happened in the first months of 2021, which were related to Archegos and supply chain funds.

Mr. Lehmann joined CSG in October 2021, and was one of the new hires that Horta-Osorio brought into CSG to support the implementation of the new strategy and to improve the Group’s risk management. Mr. Lehmann has a well-established reputation in Swiss and international financial markets. Before joining CSG, he was Credit Operational Officer (COO) and head of Swiss business at UBS Group AG, having also spent nearly 20 years at Zurich Insurance Group.

We consider that the appointment of Mr. Lehmann should provide a relatively smooth transition for the ongoing execution of the Group’s 2022-2024 strategy, which was presented to investors in November 2021. However, we consider that any progress in rebuilding investor confidence and improvement of risk management and business culture of the Group will likely be more visible in the medium-term, as the Group needs to demonstrate a period of management stability.

Management stability is a key consideration for any organisation’s reputation. CSG has had several significant top management changes in the last 24 months, with changes at both Chief Executive Officer (CEO) and Chairman in a short period of time. We view this as not helping to restore confidence in management. In February 2020, Tidjane Thiam stepped down as CEO, after being subject to months of public speculation regarding a surveillance case that emerged after a senior executive moved to work for a competitor. He was replaced by Thomas Gottstein, who has had a long career within CSG and was previously the Swiss Bank CEO.

Moreover, the last 12 months have been challenging from the Group’s reputation and risk management perspective. In March 2021, the Group suspended redemptions and subscriptions of some supply chain funds that were tied to a company that filed for creditor protection and which may potentially lead to the investors in those funds bearing significant losses. Later in March 2021, the Group reported a significant loss after the disclosure of a substantial write-down in relation to a single customer, Archegos.

DBRS Morningstar revised the trend on CSG’s “A (low)” Long-Term Issuer rating to Negative from Stable in April 2021 to reflect concerns over the Group’s risk management. The Negative trend also takes into consideration that although Credit Suisse is taking steps to address these risk management weaknesses, DBRS Morningstar has limited tolerance for further risk slippages at this rating level.