Credit Suisse Chief Thiam Gets Final Shot at Defining His Legacy

(Bloomberg) --

Credit Suisse Group AG’s unexpected decision to oust Chief Executive Officer Tidjane Thiam came with an unusual kicker: he’d get the chance to present the bank’s results one last time.

For the 57-year-old, who just lost a bitter boardroom battle over a spying scandal that rattled the Swiss elites, it’s an opportunity to showcase his turnaround and salvage a legacy that won him the support of key investors, despite a share price that nearly halved. His first public appearance since Friday’s ouster is also a chance to break his silence on the circumstances of his departure, though there’s little precedent on how this could play out.

The bare numbers are likely be favorable, following a quarter that saw Wall Street profit from a surge in fixed income trading. Analysts surveyed by the bank expect net income for the quarter to more than triple, capping the most profitable year since Thiam took over in mid-2015. A key return measure is expected to beat that of UBS Group AG for the quarter, though that will partly reflect an accounting change.

“We expect fourth-quarter results to be strong,” helped by the rally in fixed-income trading, Kian Abouhossein, an analyst with JPMorgan Chase & Co., wrote in a note. “With restructuring largely finalized, there are questions on whether there is going to be any change in strategic direction going forward under the new CEO.”

Thiam, who will present the results alongside his successor Thomas Gottstein, is leaving just as his strategy is starting to bear fruit, with an expected profit that’s almost twice as high as what he found when he started out. Since then, he slashed costs, turned around the troubled trading business and pivoted the firm to wealth management, following similar strategic moves by rival UBS.

Gottstein will now have to persuade investors -- especially those who backed Thiam in the showdown with Chairman Urs Rohner -- that he can translate his experience as head of the Swiss unit onto a global scale, and build on the turnaround.

Thiam’s medicine for Credit Suisse included thousands of job cuts and a capital increase to pay for the restructuring. It was overshadowed by plenty of headaches, such as unexpected losses at the trading unit in 2016, and resulted in three years of losses. Late last year, he was forced to lower a key profitability target as trade tensions and negative interest rates clouded the outlook for banks.

Click here for a timeline of Thiam’s fall from grace.

Shares of Credit Suisse have lost about 45% since Thiam took over, though they’ve outperformed UBS over the past year.

In a statement on Friday announcing Thiam’s departure, Chairman Rohner said the CEO “made an enormous contribution” and credited him with strengthening capital and returning the lender to profit. Thiam said recent events “undoubtedly disturbed Credit Suisse and caused anxiety and hurt” and again denied that he had any involvement in the spying.

The troubles started a year ago when Thiam and Khan got into an altercation at a party. Their falling-out didn’t become public until later, but inside the bank it was an open secret that the relationship between the two had soured. Khan left Credit Suisse in July and soon after announced he was joining UBS.

By September, it emerged that Credit Suisse had hired private investigators to spy on Khan and prevent him from poaching former colleagues. Credit Suisse’s inquiry into the surveillance cleared Thiam, with a close confidante of his taking the fall. But soon a second spy case surfaced, prompting Rohner to consider possible replacements for the CEO, according to people with knowledge of the matter.

Read more about how the power struggle at Credit Suisse erupted.

Thiam’s successor is a 20-year Credit Suisse veteran and the bank’s first Swiss chief in almost two decades. His biggest achievement until now was overseeing one of the crown jewels of the lender, the unit known as Swiss Universal Bank. A sort of miniature Credit Suisse focused on the domestic market, it is the biggest contributor to pretax profit and includes a private banking arm as well as investment banking.

David Herro, the most vocal of Thiam’s backers, called Gottstein “capable and talented.” But Herro also increased pressure on Rohner to step down, in a sign that the unrest at the top of the lender may not be over yet.

“We think there is great potential in Credit Suisse and we would hate to see it ruined by a chairman who is not on the same page of shareholder value creation as we are,” 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 last week. “If he really loved the company, he should step down and resign.”

To contact the reporters on this story: Marion Halftermeyer in Zurich at mhalftermeye@bloomberg.net;Patrick Winters in Zurich at pwinters3@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Christian Baumgaertel

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