Harris Associates further cut its stake in Credit Suisse last month, but investment chief David Herro gives his full confidence to its Chairman. It is not the first contradictory action of the bank's one-time largest shareholder.

This week again brought bad news for Axel Lehmann. The Chairman of Credit Suisse himself caused the problems as the Swiss Financial Market Supervisory Authority (Finma) initiated an investigation into his comments about customer outflows at the bank, according to a «Reuters» report.

At issue with Lehmann's statements is that he made them before the completion of a $4 billion capital increase. The accusation is whether his statements that outflows of client assets under management had stopped were false and unfairly supported Credit Suisse's share price.

Unexpected Support

Nevertheless, Lehman is receiving support from an unexpected source. In an interview with the Swiss newspaper «Finanz und Wirtschaft» (in German, behind paywall), David Herro said he is convinced that Lehman «would not intentionally mislead anyone.» Lehmann is an extremely hard-working and honest man, which is why Herro has full confidence in him.

The fact the investment chief of Harris Associates is backing the bank's top management is by no means a matter of course. Once Credit Suisse's largest shareholder, he has repeatedly attracted attention in the past for his criticism of the Swiss bank's strategy and his swipes at management.

Faint Praise?

What makes the current praise suspicious is that Harris reduced its Credit Suisse stake below the mandatory reporting threshold of three percent last January, as reported by finews.com. Herro explained Harris did not fully participate in the capital increase and therefore its shares were diluted.

It is also a fact the announcement of the reorganization failed to convince Harris of its viability and it sold Credit Suisse shares as a result. Harris has repeatedly attracted attention due to contradictions and vagueness, which eventually affected the investment.

Worst Investment

Harris first bought Credit Suisse shares twenty years ago, subsequently selling part of the positions at a profit ahead of the financial crisis. But the tide turned after that. «Over the last ten years, Credit Suisse was probably the worst-performing investment in our portfolio,» Herro told the newspaper. One catastrophe after another was to blame, but ultimately Herro also had a hand in it.

Herro was particularly unhappy with Lehmann's predecessor Urs Rohner. To be sure, all the problems could not be laid at Rohner's feet, but during his chairmanship, the bank experienced an almost inconceivable destruction of value. Rohner managed to cling to the top position for another year in 2020, and Harris should have sold shares, Herro said in self-critical retrospection.

Selling the Family Silver

Now it's up to Lehmann and CEO Ulrich Koerner to guide the bank out of trouble. Failing that, Herro believes that further measures, including the sale of other parts of the company, are inevitable. This means, in addition to the bank's asset management and wealth management operations, above all the business of the Swiss banking unit. The bank's silverware.

Waiting to Pounce

There is at least one firm ready to pounce should that come to pass. Deutsche Bank was making plans before Credit Suisse announced its restructuring plans to buy parts of Credit Suisse should they become available, as finews.com reported.