Harris Associates, the hedge fund that was once Credit Suisse’s biggest shareholder, has sold out of its position in the struggling Swiss bank entirely, the Financial Times said on Monday.
“We have lots of other options to invest,” it cited managing director David Herro as saying. “Rising interest rates mean lots of European financials are headed in the other direction. Why go for something that is burning capital when the rest of the sector is now generating it?”
Credit Suisse (SIX:CSGN) stock hit an all-time low of CHF 2.52 last week, with Harris’ sales adding to the negative mood that has built since the group announced its plan for a massive dilutive capital increase funded by middle eastern investors and the sale of its investment bank and securitized products businesses.
Even those measures won’t be an immediate panacea: The bank is forecasting another loss in 2023 to follow the CHF 7.29 billion ($1 = CHF 0.9331) loss it made last year and the CHF 1.65B it lost in 2021.
What will be left of Credit Suisse will be centered around its wealth management business, still one of the world’s largest. However, Herro told the FT that: “There is a question about the future of the franchise. There have been large outflows from wealth management.”
The bank lost CHF 111B in outflows in the last quarter of the year as clients responded, in part, to rumors that it was close to collapse. The recapitalization plan has squashed those rumors conclusively since then, but Reuters reported in February that Swiss regulators are investigating chairman Axel Lehmann’s comments in December which claimed – inaccurately – that the bank’s situation with outflows had stabilized.
Herro was critical of the restructuring plan for the investment bank, seeing it as “a noble cause” but “cumbersome and far more costly in terms of cash burn than we expected.”
Herro also said the bank was giving the securitized products division away too cheaply.
With Harris and some other hedge funds all selling down in recent months, the bank’s largest shareholders are now Saudi National Bank, with 10%, and the Qatar Investment Authority with 7%.
Credit Suisse stock opened down 1.94% in Zurich on Monday, the worst performer among major European bank stocks.