Credit Suisse Taps Axel Lehmann as Chairman in Emergency Fix
Credit Suisse Makes Emergency Swiss Fix With Chairman Pick
(Bloomberg) --
Credit Suisse Group AG is turning to a Swiss insider to be its fix-it chairman after Antonio Horta-Osorio was forced to resign, signaling a further shift toward caution and retrenchment and away from the risk-taking of recent years that dented its profit and reputation.
Axel Lehmann, 62, is a relative newcomer who joined the board of directors in October to oversee the risk committee after a career at Zurich Insurance Group AG and UBS Group AG, where his roles included chief operating officer. He’s replacing ex-Lloyd’s Banking Group Plc Chief Executive Officer Horta-Osorio, who was ousted for breaking quarantine regulations.
Thrown into chaos by the twin blow-ups of Archegos Capital Management and Greensill Capital last year, Credit Suisse tasked Horta-Osorio in April with cutting risk and putting it on a path back to stability. While he implemented a new strategy that scaled down the trading business, his management style proved divisive and he was forced to resign over at least two instances where he broke quarantine rules in Switzerland and the U.K.
“Axel Lehmann in our view has a well-established profile in Switzerland,” JPMorgan Chase & Co. analysts Kian Abouhossein and Amit Ranjan said in a note on Monday. “He along with the CEO is likely to continue working on improving the risk culture of the group.”
Right Course
On Monday, Lehmann pledged to continue with the strategy set by his predecessor, which includes focusing more on wealth management and paring back riskier activity in the investment bank.
“We have set the right course with the new strategy and will continue to embed a stronger risk culture across the firm,” he said in a statement.
The decision to replace Horta-Osorio with an established player on the local scene mirrors a move in early 2020 when the bank abruptly replaced Chief Executive Officer Tidjane Thiam after a spying scandal with Thomas Gottstein, the head of the local business and its first Swiss-born CEO in almost two decades.
Horta-Osorio had his detractors within Credit Suisse. Some executives who spoke on condition of anonymity before the ouster said the 57-year-old’s blunt approach was what the bank needed and appreciated him walking trading floors from New York to London and Paris. Others described him as divisive.
Those voices grew louder when Horta-Osorio had to apologize last month for breaking Swiss quarantine rules. And after an internal probe and media reports showing an additional breach of Covid rules and mixing personal and business travel, the chairman who had promised to instill a culture of personal responsibility faced a fight for his job. After an intense board meeting on Sunday, he was gone.
“I regret that a number of my personal actions have led to difficulties for the bank and compromised my ability to represent the bank internally and externally,” Horta-Osorio said in a statement just after midnight Monday in Zurich.
Lehmann is seen as bringing the approach of an effective mediator. One executive who worked with him at UBS says he has a calming effect on more hot-headed colleagues and praised his rational and clinical approach to problems. Another executive from his time at the Swiss rival praised his network within the country, but said he faced questions over whether he had the vision needed for bigger roles.
In contrast to the relationship between Horta-Osorio and Gottstein, the bank’s CEO knows Lehmann well, people familiar with the two men said. They were heads of the Credit Suisse and UBS’s local Swiss businesses at the same time and they have a friendly working relationship.
Lehmann is “likely to see a return to a more traditional Chairman-CEO relationship,” Citigroup Inc. analysts including Andrew Coombs wrote in a note on Monday. While the overhaul plans shepherded by Horta-Osorio met with mixed reviews, “his departure leaves Credit Suisse with a lack of strong characters at the top and leadership questions will likely be raised.”
Risk Manager
Lehmann spent almost two decades at Zurich Insurance. He joined UBS as a board member of its Swiss unit shortly after the firm’s bailout during the 2008 financial crisis. He worked alongside then-CEO Sergio Ermotti in shifting UBS’s strategy and curtailing risk, eventually becoming COO and then later running the Swiss business.
The challenge for the new chairman will be to show shareholders, staff, clients and regulators that Credit Suisse has a handle on its risks while also safeguarding growth in faster-growing regions outside its home market, including China.
“Credit Suisse can ill-afford another scandal,” Citi’s Coombs wrote.
No Alternative
David Herro, deputy chairman of major Credit Suisse shareholder Harris Associates and a previous backer of Horta-Osorio, said Monday he was “very disappointed” to learn of the chairman’s departure.
“We remain hopeful that, with the various management enhancements including the appointment of Axel Lehmann and the numerous appointments that have been made in the last eight months to the executive board, along with a timely execution of this new strategic plan, that Credit Suisse will be not only strengthened but revitalized,” he said.
Arturo Bris, a finance professor at IMD Business School in Lausanne, Switzerland, said that while focusing on the “Swiss DNA” of the bank may not be popular in some circles, Credit Suisse had little choice after the news that Horta-Osorio broke quarantine.
Lehmann is “not only Swiss, he’s a risk manager and the stereotype he will be going up against is one of the uncommunicative Swiss banker who doesn’t inspire, particularly to U.S. shareholders,” Bris said in an interview. “But I don’t think there was an alternative.”
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