Credit Suisse cuts risk as defections mount in wake of scandals

Bloomberg

Credit Suisse Group AG is grappling with how to keep top bankers from fleeing to competitors and drastically reducing risk as new Chairman Antonio Horta-Osorio seeks to recover from a
series of scandals.
The lender is cutting ties with SoftBank Group Corp, a backer to Lex Greensill’s collapsed supply-chain finance empire, and it’s temporarily barring clients from withdrawing all of their cash from a fund that invests with Renaissance Technologies after the strategy tanked and investors rushed for the exit.
It’s also considering retention bonuses for top performers to stabilise the business as defections mount in the wake of the Greensill debacle and the implosion of Bill Hwang’s Archegos Capital Management, which contributed to a first-quarter pretax loss of $1 billion.
“They’re looking a bit like a basket case right now,” Octavio Marenzi, chief executive officer of capital markets consulting firm Opimas, said in an interview. “The Archegos thing is really bad, and what happens after an event like that is people start to pick on them. They’re seen as weakest kid in the class.”
Some of the firm’s senior talent is streaming for the exits. Its top financial services banker, Alejandro Przygoda, is leaving for Jefferies Financial Group Inc., along with at least three colleagues. That followed the recent departures of at least four other members of the financial institutions group to competitors including Barclays Plc., Bank of America Corp. and Goldman Sachs Group Inc.
Credit Suisse will no longer do any new business with SoftBank, people with knowledge of situation said, a decision that may ripple across the firm’s investment bank. SoftBank has been a prolific dealmaker, and last year Credit Suisse and other banks held about $8 billion of SoftBank shares in collateral, pledged by founder Masayoshi Son.
Horta-Osorio, 57, who succeeded Urs Rohner as chairman last month, pledged a wide-ranging review after the bank was forced to suspend billions of dollars of funds it managed with Greensill and took a $5.5 billion hit on Archegos, raising questions about the oversight of key clients.
Credit Suisse conducted an internal review into the Greensill funds after allegations of possible conflicts of interest involving SoftBank last year. A number of SoftBank portfolio companies received loans via supply-chain funds at Credit Suisse, while SoftBank was also an investor in the Credit Suisse funds.
In the aftermath, SoftBank pulled $700 million from the funds and the bank changed its investment guidelines for Credit Suisse’s funds to reduce the maximum exposure to a single borrower.