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Bleak Outlook Worsens For Credit Suisse Following Harris Associates Selloff

Harris Associates, an investment firm known for stock picking, has chosen to end its partnership with Credit Suisse Group AG by selling its entire stake in the troubled Swiss bank. 

The decision by David Herro, chief investment officer for international equities at Harris Associates, was made after a long-term relationship of around two decades. The sale was completed in the past three to four months.

Harris Associates used to be Credit Suisse’s largest shareholder, but it had reduced its 10% holding to 5% by the end of 2022. Following the bank’s financial results last month, which showed an unexpectedly significant loss and record outflows, the stock fell to an all-time low last week. 

Shares in Credit Suisse have lost almost 95% of their value since the summer of 2007. Furthermore, the bank had missed out on the rally at European peers, which began late last year when monetary tightening boosted prospects for lending profitability.

David Herro said: “Rising interest rates mean lots of European financials are headed in the other direction. Why go for something burning capital when the rest of the sector is now generating it?”

Credit Suisse has been trying to win back clients and stem the outflow of senior staff that has dealt a blow to its wealth business, which is vital to its revival. In the fourth quarter of 2022, customers withdrew a record 110.5 billion Swiss francs ($118 billion). Not a good look for one of the most prominent global financial institutions.

Herro also criticized Credit Suisse’s plan to spin out its investment bank under the leadership of Michael Klein. He stated that it was “cumbersome” and would burn through more cash than he had anticipated. 

Harris Associates had owned Credit Suisse stock since the early years of this century. It doubled down on its bet after the 2008 financial crisis. While Herro initially defended the bank when its troubles began, he grew increasingly critical of the board. The lender struggled to fix its investment bank and move past losses and scandals.

According to the Zurich-based lender’s website and data compiled by Bloomberg, the Saudi National Bank is now the largest holder of Credit Suisse. In addition, the Qatar Investment Authority increased its stake after Credit Suisse issued new shares as part of a 4 billion Swiss franc capital raise late last year.