Credit Suisse investor loses faith in management over cash outflows

Credit Suisse investor loses faith in management over cash outflows

ZURICH (Reuters) – Credit Suisse‘s senior management has lost the confidence of investors after revealing cash outflows had persisted despite signalling they had stabilised, one of Germany’s top investment managers told Reuters on Friday.

Deka Investment, which manages assets worth 367 billion euros ($391.77 billion), said it was concerned that investors were continuing to pull money out of Switzerlands second-biggest bank.

“The persistent outflows are frightening,” said Andreas Thomae, corporate governance specialist at Deka. “This absolutely has to change.”

Thomae said investors were particularly disappointed that withdrawals had continued after Credit Suisse CEO Ulrich Koerner and Chairman Axel Lehmann had said the situation had stabilised.

“And then we learn that the outflows have slowed down, but are persisting,” Thomae told Reuters. “Unfortunately, the companys top management has lost confidence among investors as a result.”

Deka, which is owned by Germanys unlisted savings banks, holds a stake of 0.02% in Credit Suisse, according to Refinitiv data. The investment is mainly in the form of indexed-linked funds.

Credit Suisse shares rebounded on Friday, gaining nearly 4% after losing nearly 15% on Thursday when shareholders took fright at results described by one shareholder as “catastrophic.”

The bank also saw a sharp acceleration in withdrawals in the fourth quarter, with outflows of more than 110 billion Swiss francs, although it said the picture has been improving.

Many questions still remained open and leading to investor uncertainty, said Bank Vontobel analyst Andreas Venditti.

“How quickly will CS recover from the massive damage it suffered last year？ The market is still wondering what the risk/return profile of ”New Credit Suisse“ will look like,” Venditti said.

In another sign of market uncertainty, the cost of insuring exposure to Credit Suisse debt rose on Friday by 24 basis points (bps) from Thursdays close to 320 bps, data from S&P Global Market Intelligence showed.

Ratings agencies said Credit Suisse had ‘some momentum’ in its restructuring, including disposing of non core assets and slashing costs, but faced significant risks ahead.

“Credit Suisses ratings would also come under pressure if the wealth management franchise suffers lasting damage,” said Fitch, which has a negative outlook on the bank.

Fitch said the banks assets under management needed to recover, while it could not afford its restructuring plan to stall or financial performance weaken further.

Moodys, which rates Credit Suisse at two notches above junk status, expects the lender to post further large losses in 2023, due to reduced revenue streams and restructuring costs.

The agency expects moderate losses in 2024 before the bank returns to modest profitability in 2025.

Credit Suisse‘s turnaround plan, which aims to shift its focus away from investment banking and towards less turbulent wealth management, carries “substantial execution risk due to its breadth and complexity,” Moody’s said on Friday.

“Although the plan could be positive in the long run and lead to a substantially de-risked, more efficient and simplified bank,” it added.

($1 = 0.9368 euros)

(Reporting by Oliver Hirt and John Revill, Editing by Louise Heavens)

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