CS Credit Suisse Group

By Margot Patrick 

Credit Suisse Group AG named António Horta-Osório as its next chairman Tuesday, marking a changing of the guard after a decade under current chairman Urs Rohner punctuated by regulatory fines and scandal.

Mr. Horta-Osório had said in July he was leaving his job as chief executive at Britain's Lloyds Banking Group PLC. It named his successor on Monday. The Portuguese executive is one of Europe's most highly regarded bankers after a turnaround at Lloyds, and Mr. Rohner said he brings an "impressive record of accomplishments." Shareholders will vote on the proposed appointment at the bank's annual meeting in April. Mr. Rohner had said he would leave Credit Suisse when he hits a 12-year board-term limit at that meeting.

Under Mr. Rohner, Credit Suisse's run-in with regulators included a $2.6 billion settlement and guilty plea with the U.S. Justice Department in 2014 for conspiring to aid tax evasion by wealthy Americans, and a $5.3 billion settlement in 2017 with U.S. authorities over toxic mortgage securities sold before the 2008 financial crisis.

Earlier this year, the bank ousted former CEO Tidjane Thiam for failing to contain the reputational fallout from a scandal that involved bank staff being followed by private investigators. The Wall Street Journal on Monday reported that lawyers hired by Credit Suisse found two incidents of the bank putting employees under observation by investigators, predating two others in 2019 that the bank had blamed on an executive who was fired. Switzerland's financial regulator started enforcement proceedings on how the bank controls and documents such activities in September. Those proceedings are ongoing and Credit Suisse says it is cooperating.

Mr. Thiam was succeeded by Thomas Gottstein, who had run Credit Suisse's domestic Swiss unit.

Credit Suisse separately said on Tuesday it could take a provision in the fourth quarter to reflect a potential $680 million judgment for damages being sought in a New York civil court over a mortgage-backed security it sold in 2007. It said it already has taken a $300 million provision in the case. Credit Suisse said it believes it has strong grounds to appeal such a judgment.

The potential provision adds to an unexpected $450 million fourth-quarter charge announced by the bank last week to reflect changes at a U.S. asset manager York Capital Management, in which it holds a 30% stake.

At Lloyds, Mr. Horta-Osório, 56, carried out a sweeping overhaul in the wake of the financial crisis. The bank narrowed its focus largely to the U.K., shedding most of its investment banking and investment units and simplifying its operations.

Most of his banking experience, which includes earlier stints at Citigroup Inc., Goldman Sachs Group Inc. and Banco Santander SA, has been in retail and commercial banking rather than Credit Suisse's core business serving the global rich.

In the U.K., Mr. Horta-Osório became regarded as a more acceptable face of banking after many bankers were vilified for helping cause the financial crisis. Shortly after starting as Lloyds CEO in 2011, he played a pivotal role in getting the country's banks to voluntarily start compensating millions of customers who had been mis-sold insurance, and said it was the right thing to do. The industry initially thought the bill would be around GBP5 billion, equivalent to $6.66 billion, but it spiraled as more claims came in, and Lloyds alone has paid out GBP22 billion to affected customers.

Mr. Horta-Osório said Tuesday that it is "a time of great opportunity" for Credit Suisse and its employees, clients and shareholders.

While Mr. Rohner has been chairman, Credit Suisse also underwent an overhaul to adapt to changes in banking after the financial crisis. Its strategy under former CEO Mr. Thiam to focus on wealth management has paid off so far in the pandemic. Loan loss provisions have been relatively contained compared with other European banks, reflecting its lending in its conservative Swiss home market and to the rich.

On Tuesday, Moody's Investors Service lifted the bank's credit rating one notch to Baa1, citing its "improved and more stable profitability" from that restructuring.

Mr. Rohner has been on the board since 2009 and chairman since 2011. He was the bank's general counsel and chief operating officer before that, having joined Credit Suisse in 2004 from a German media company.

His time as Credit Suisse has been marked by survival. Swiss investment adviser Ethos Foundation repeatedly called for shareholders to vote against his reelection at annual meetings, and most recently this year it said he should resign to take responsibility for the spying scandal.

The bank's biggest shareholder with a roughly 8% stake, David Herro of Harris Associates, also called for Mr. Rohner's resignation this year, but Mr. Thiam was forced out instead.

Write to Margot Patrick at margot.patrick@wsj.com

(END) Dow Jones Newswires

December 01, 2020 07:26 ET (12:26 GMT)

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