Top Credit Suisse shareholder Harris Associates sells out
Sharecast – US investment manager Harris Associates, whose deputy chair and chief investment officer David Herro was for years among the Swiss bank’s most prominent supporters, owned as much as 10% of Credit Suisse’s stock last year.
However, Herro told the Financial Times that Harris had started to cut its exposure in October following the bank’s CHF4bn fundraising, when Saudi National Bank supplanted it as the top investor, and had now divested completely.
“There is a question about the future of the franchise. There have been large outflows from wealth management,” he told the FT, referring to the CHF111bn withdrawn by Credit Suisse (SIX:) customers in the last three months of last year, particularly after rumours appeared on social media about the bank’s financial health.
“We have lots of other options to invest,” he added. “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?”
Herro told the FT he was not convinced that Credit Suisse’s latest radical restructuring, which includes spinning off its investment bank and beefing up its wealth management business, can turn round the lender’s fortunes.
In particular, he said Harris is frustrated by the cost and lack of transparency of the investment banking spin-off deal with former board member Michael Klein – which will revive the First Boston brand name – and the agreement to sell its securitised products business to private equity group Apollo.
“We feel the plan to restructure the investment bank, while a noble cause, is cumbersome and far more costly in terms of cash burn than we expected,” Herro said. “We were also not satisfied with what we were getting in terms of proceeds . . . from the sale of securitised products.”
Harris first bought Credit Suisse stock in 2002 when it was priced at less than CHF30, and sold it all before the financial crisis in 2008 at prices between CHF60 and CHF70, according to filings.
It bought back in during 2009 when the price had fallen to about CHF23, spotting a value opportunity, the FT said. After initially rising to CHF56, the shares have since been on a steady decline. By May 2012, Harris owned 37m shares in the group, which at the time were worth just over CHF600mn but today would be valued at CHF103mn.
“It has been a measurable drag on our performance,” Herro told the FT. “You can’t win every time – it is the business I am in. We meet every company we own, but you spend a lot more time with your problem children. Credit Suisse has been a drain of time and value for years.”
