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Bloomberg

Credit Suisse Scandal Toll Goes Ever Higher as Rivals Thrive

(Bloomberg) — In an era of prosperity for investment banks, Credit Suisse Group AG is careening from one crisis to another and then another — this time, with a $4.7 billion writedown tied to billionaire investor Bill Hwang’s trading blowout.The staggering hit — the largest yet linked to market-shaking losses run up by Hwang’s Archegos Capital Management — prompted sweeping management changes at the Swiss bank Tuesday and cast fresh doubt on its checkered record of managing risks. It caps a catalog of costly errors at Credit Suisse — most recently the collapse of Greensill Capital — in what was supposed to be the start of steadier era under Chief Executive Officer Thomas Gottstein.At a moment when investment banks are feasting on market activity and dealmaking, Credit Suisse is under mounting pressure to persuade shareholders and clients it can put its house in order and remain a vital, independent force in global banking. After the firm announced plans to cut its dividend and suspend share buybacks, analysts at JPMorgan Chase & Co. cut their recommendation for the stock, which already was breaking with peers in tumbling this year.“The ongoing negative newsflow could have an impact on the remainder” of Credit Suisse’s businesses, analysts Kian Abouhossein and Amit Ranjan wrote in a note, lowering their rating to neutral from overweight. “Besides the impact from various management changes and regulatory oversight,” they wrote, the bank “might have to pursue a strategy of ‘capital preservation’” that could restrain growth.David Herro at Harris Associates, a top shareholder of Credit Suisse, said the bank’s losses should serve as a “wakeup call” to expedite cultural change as Chairman Urs Rohner prepares to hand over to Lloyds Banking Group Plc CEO Antonio Horta-Osorio at the end of the month. Rohner has offered to forgo his compensation for 2020 of 1.5 million francs.Another long-standing backer of the bank, Qatar’s former prime minister Sheikh Hamad bin Jassim Al Thani, stands to suffer a personal hit as well after vehicles linked to him invested about $200 million in funds Credit Suisse ran with Greensill, according to people familiar with the matter. As former head of the Qatar Investment Authority, Sheik Hamad had made Qatar one of the Swiss bank’s largest shareholders.Acknowledging the need for deep change, Credit Suisse on Tuesday replaced its investment bank head and chief risk officer, along with a handful of other executives. Gottstein, who took over in February last year after a spying scandal toppled his predecessor, told the Neue Zuercher Zeitung that the bank has no sacred cows with regard to strategy.“Serious lessons will be learned,” he pledged in a statement. The Archegos loss “is unacceptable.”While the Swiss bank wasn’t the only firm that helped Hwang’s family office lever up large positions in a relatively…

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