Credit Suisse’s New Chair Horta-Osorio Faces Toughest Crisis Yet

The last time Antonio Horta-Osorio started a new job, he was plunged into the middle of a crisis roiling Britain’s biggest mortgage lender. Ten years later, he’s facing an even tougher challenge.

From his residence in Kensington, west London, the outgoing boss of Lloyds Banking Group Plc is preparing to take over as chairman of Credit Suisse Group AG in May, replacing Urs Rohner as scandals at the Swiss lender continue to mount.

“You should continuously try to face new challenges,” Horta-Osorio said in an interview with Bloomberg TV due to air on Monday. “Otherwise you just start to decay.”

The Portuguese banker joined Lloyds as chief executive officer in 2011 and got to work unpicking the toxic acquisition of HBOS Plc that led to a 20.3 billion-pound ($28 billion) bailout during the financial crisis. Over the course of his tenure, he cut thousands of jobs and billions of pounds in costs, closed overseas units and restored the bank to profitability and full private ownership.

Swiss Challenge

He arrives in Switzerland to a crisis of confidence. Credit Suisse last month took a 4.4 billion Swiss franc ($4.8 billion) writedown and has since parted ways with several top executives over its dealings with Archegos Capital Management, weeks after the implosion of Greensill Capital. Dividends have been cut and share-buybacks suspended. Analysts see further losses and potential fines. Credit Suisse’s market value has dropped by about 20% since it first raised issues with Archegos on March 29.

Horta-Osorio “is exactly what Credit Suisse needs,” said David Herro of Harris Associates, who has held both Lloyds and Credit Suisse shares for more than 10 years. “He always kept his promises and command of details.” In Zurich, he should focus on retreating from high risk and low return businesses, keeping talent and controlling cost and risk, Herro said.

The Swiss lender is grappling with how much its leadership team knew and controlled these client risks. Horta-Osorio’s command of even the smallest details could prove valuable. At Lloyds, he knew every major loan, corporate client and line of business in depth, people who have worked with him said. As a leader he values loyalty, along with respect for the hierarchy and established processes, the people said, asking not to be named discussing private matters.

Credit Suisse’s New Chair Horta-Osorio Faces Toughest Crisis Yet

The new position returns Horta-Osorio to investment banking after 15 years focused on retail, and moves him from the front line into the chairman’s role. And while Lloyds has steered clear of major acquisitions in recent years, dealmaking could soon be at the top of his agenda in Switzerland.

“In an organization facing a crisis like Credit Suisse currently, the chairman has to become more hands-on until the problems are dealt with,” said Jamie Risso-Gill, managing director of executive search firm Per Ardua Associates Ltd. in London.

Horta-Osorio will be working alongside CEO Thomas Gottstein, a longtime Credit Suisse banker who took the top job 14 months ago. “It’s the chairman’s role to evaluate the CEO’s performance,” said Risso-Gill.

Competitive Drive

Horta-Osorio and Gottstein are both 57 years old with degrees in business and administration. On paper, at least, the similarities end there.

Before joining Lloyds, Horta-Osorio ran Banco Santander SA’s British unit, as well as spending time in the U.S., Portugal and Brazil for various banks. He also has strong ties to his native Lisbon, where he used to travel frequently, and enjoys diving holidays and drinking green tea. A competitive tennis player, he played every Wednesday at the Queen’s Club near his London home.

Credit Suisse’s New Chair Horta-Osorio Faces Toughest Crisis Yet

Gottstein, meanwhile, is Credit Suisse’s consummate insider. Born locally, he played youth football for FC Zurich and attended university in the city before a 20-year track record in investment banking made him a safe pair of hands when former CEO Tidjane Thiam was ousted. People who know him have described Gottstein as blunt, focused on numbers and “very Swiss.”

“London has always been international and multicultural whereas Switzerland will be different,” said Ismail Erturk, a senior lecturer in banking at the University of Manchester. “He is coming to a bank that is under criticism by regulators. In the U.K., Lloyds had a lot of support from the British government after the crisis.”

Fitting into the Swiss establishment might also prove a challenge for the banker who has embraced life in London, where he has been a member of the Court of the Bank of England and is chairman of the Wallace Collection.

Swiss banking circles can be “very cliquey,” according to Herro. “But he will do fine given his talents.”

Rapid Redress

Soon after joining Lloyds, Horta-Osorio moved to tackle one of British banking’s most expensive scandals. The firm broke ranks and became the first lender to set aside provisions for mis-sold payment protection insurance, sparking a compensation program that’s cost the bank almost 22 billion pounds.

“I was seriously concerned -- to be very open -- that the bank might not survive,” Horta-Osorio said of his early days in charge. “I thought that we had very little time to redress the situation.”

The CEO’s relationship with staff has been marked by his task of cutting Lloyds’ headcount by about 40%, or more than 41,000 workers. Horta-Osorio wouldn’t hesitate to tell employees that their units no longer existed, said people who worked with him, who asked not to be named discussing private information.

At the same, Horta-Osorio also advocated for initiatives to boost mental health in the workplace -- a cause he’s championed since taking leave for insomnia eight months after joining Lloyds.

He prized loyalty among Lloyds’ senior ranks, while replacing several executives with lieutenants from Santander such as Antonio Lorenzo and Juan Colombas.

“He was very quick to exit senior managers who did not acquiesce to his view,” said Fahed Kunwar, analyst at Redburn. In Zurich, he will scrutinize “who needs to be exited,” Kunwar added.

‘Cleaning Rubbish’

Initial tasks at Credit Suisse will include assessing risk and compliance and whether a more drastic overhaul is needed, according to analysts. “We expect more structural organizational and process changes,” said Alison Williams at Bloomberg Intelligence in a recent note.

“He got rid of all the toxic HBOS assets, loans and overseas assets. And on top of that, he managed the PPI scandal. In terms of cleaning rubbish, I would have thought Horta-Osorio is very good at that,” said Edward Firth, analyst at Keefe, Bruyette & Woods.

Horta-Osorio’s tenure at Lloyds has had its hiccups: he was criticized for not taking action on a tip-off in 2014 that fraud at the bank’s HBOS unit was concealed. In 2016, he apologized to staff for the bad publicity caused by allegations of an affair, with the board scrutinizing his expenses.

He leaves Lloyds as one of Europe’s longest-surviving bank CEOs after a turbulent decade for the industry. That’s long enough, he says.

“People should not try to self-perpetuate themselves in positions,” he said. “It’s good for companies to have a fresh perspective.”

©2021 Bloomberg L.P.

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