Credit Suisse Group AG ADR CS

Credit Suisse confirmed its Chairperson Antonio Horta-Osorio has resigned in a dramatic midnight announcement. Horta-Osorio flaunted coronavirus quarantine restrictions, which resulted in his resignation. We believe swift and decisive action was necessary. Axel P. Lehmann is a more than capable replacement. Credit Suisse’s well-published recent history of risk management lapses and scandals calls for a board and executive that is beyond reproach. Credit Suisse appointed Horta-Osorio to address precisely these issues, something he has done with some success already, but to have a chairperson the subject of an ongoing scandal would have been untenable. The media will undoubtedly try to link Horta-Osorio actions to the other issues that have dominated the news around Credit Suisse. We believe it would be incorrect to conflate poor personal judgement by an individual with a poor institutional culture. On numerous occasions, we have been critical about Credit Suisse’s culture, especially around risk management. Horta-Osorio’s actions stand separate from this. We maintain our narrow moat rating and CHF 14/share fair value estimate. We highlight we already have a Poor capital allocation rating and very high uncertainty rating for Credit Suisse to reflect its poor risk management track record.