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Tidjane Thiam, the banker who bothered Switzerland

By Olivier Caslin
Posted on Thursday, 12 March 2020 14:06

Tidjane Thiam
Thiam announcing CS results - 13 February. Fabrice COFFRINI/AFP

Tidjane Thiam turned Credit Suisse around, but still ended up being forced to resign.

The architect of the spectacular turnaround of the Swiss institution, the ace of finance was forced to resign following, among other things, an incredible case of espionage. A new chapter is opening for the Franco-Ivorian.

“A day without laughter is a day lost,” Tidjane Thiam likes to repeat, ending his comment with a slight grin. During four and a half years at the helm of Credit Suisse, the Franco-Ivorian finance ace has forged the image of a “funny” banker, with a refreshing rather than devastating sense of humour.

“That is rare on Paradeplatz,” said a connoisseur of Zürich finance.

Since his resignation on 7 February, however, there have been few opportunities for rejoicing. “He is stunned by what has happened,” one of his close friends and family confirmed in recent days.

No doubt he is taking advantage of his stay in the United States to digest his demise, due less to his managerial performance than to the problems of governance at the second largest Swiss bank, Credit Suisse.

In January, the 58-year-old manager had still not grasped the seriousness of the situation, stating publicly he wanted to finish his term of office in 2021.

“This time, he, who had a reputation for understanding everything very quickly, saw nothing coming,” said a journalist from the Neue Zürcher Zeitung (NZZ), the Zurich financial daily, which has extensively documented the 12 months of this chronicle with a predictable end.

Became undesirable despite his success

In his defence, Tidjane Thiam could legitimately think that rescuing the rudderless CS, adrift on his arrival in 2015, and the support of the Anglo-Saxon shareholders (45% of the capital) would protect him from the fallout of the internal espionage business revealed since September 2019, of which, he asserts, he knew nothing.

It was perhaps on the evening of 6 February that the Abidjan native understood how undesirable he had become. His fate was sealed at 4 am, after two slices of cold pizza, and 20 hours of meetings. The board of directors and its president, Urs Rohner, demanded his resignation.

READ MORE: Tidjane Thiam forced to leave Credit Suisse after board fight

Tidjane Thiam consented on condition that he would be able to present the bank’s annual results six days later, the day before his departure.

On the morning in question, he surprised his colleagues by crossing the threshold of 8 Paradeplatz instead of taking the path from the car park reserved for “executives”. He takes time to greet the receptionists before reaching the second floor of the neoclassical 19th century pink sandstone building.

Once in his spacious office with its breathtaking view of the square, he repositioned the photos of his children, leaving the door wide open, “as if to say he had nothing to hide”, presumed a witness to the scene. In a simple statement, the bank confirmed his resignation that morning.

Thirteen consecutive quarters of growth

This 13 February, as he presented his latest results, Thiam, impeccable in a dark suit, was certain that the figures would ensure recognition from his peers and shareholders and validate his strategy.

READ MORE: Tidjane Thiam exits Credit Suisse with profits at decade-long high

With a pre-tax profit of CHF 4.7 billion (4.4 billion euros), the bank’s 2019 results are the best of the decade, recording its thirteenth consecutive quarter of growth. He is leaving with honours and “a clear conscience,” after “turning Credit Suisse around,” he told the financial press.

The next day, before taking his leave, he walked through the vast Lichthof hall for the last time, honoured the small festivities organized by the executive committee, smiled at the praise he received from his former colleagues, and wished his successor, Thomas Gottstein, a pure product of Credit Suisse, good luck.

He greeted him as a “friend,” even though Gottstein does not “support the Arsenal club as much as he does.” Credit Suisse stock lost 4% on the day.

By the time he arrived from London on 1 July, 2015, Credit Suisse shares had risen by 8%, while those of Prudential, whom he had just left, had fallen by 3%.

After six years at the helm of the venerable British insurer, Tidjane Thiam left insurance for the bank, as well as the city, which had made him king. His arrival at CS (he was also expected at Standard Chartered) was announced on 11 March and had caused surprise and expectation in Zürich.

He arrived in Switzerland, aged 53, having doubled the value of the Prudential brand. And while some still had reservations about his banking skills, Rohner, reminded Credit Suisse shareholders that Thiam had “led Prudential on the road to success in a very difficult environment.”

Under American Wall Street veteran Brady Dougan, the Zurich bank had accumulated losses (CHF 3 billion in 2015 [2.83bn euro]).

Thiam set about putting its books in order, settling the $5.3 billion (4.71bn euro) fine owed to the US tax authorities and settling the scandal of the controversial $1 billion (890m euro) loan to Mozambique. He cleared Credit Suisse of 58,000 accounts suspected of tax evasion and $75 billion (66.60 euro) in toxic assets.

With the bank’s stocks in early 2016 at its lowest point since 1989, Thiam reverted to the McKinsey consultant he had been in the 1990s and began a far-reaching restructuring that would span three years.

Ten thousand jobs cut

Determined to reduce costs, he reoriented the business by cutting investment banking in order to better develop wealth management. More than 10,000 positions were cut, mainly in London and New York.

At the same time, as with Prudential, he set out to conquer Asia, which now accounts for a third of the British insurer’s business, compared with less than 10% before he took the helm. But times have changed, and Thiam could not find in Asia the capital he needed to reform the bank.

“Tensions quickly emerged within the board that led Thiam to review his strategy,” said Loïc Bhend, an analyst at Bordier Private Bank. To increase the bank’s equity capital, he announced the upcoming listing of the highly profitable Swiss branch.

The operation planned for April 2017 was cancelled, but his plan restored sufficient confidence in the market to grant him the $4 billion (3.55bn euro) capital increase he had planned to raise on the stock market.

In all, CS managed to raise an additional CHF 10 billion (8.88b euro) in capital since 2015, and was exactly where Thiam wanted it to be. Trading risks had been reduced in favour of the asset management of Swiss or Asian ultra-high-net-worth individuals, from which the firm now derives 90% of its profits.

Credit Suisse, Zurich
Credit Suisse, Zurich, Switzerland © Plaza Financiera

For Loïc Bhend, the Franco-Ivorian manager has “done the job, stabilizing the bank and reassuring shareholders.”

He relied on trusted men internally – Thomas Gottstein, who managed the Swiss branch, and David Mathers, the CFO, but also loyal followers brought back from London, like his former right-hand man, Pierre-Olivier Bouée, who was however tainted by the scandal that shook Thiam’s life.

He also took under his wing a financial prodigy, Iqbal Khan, a Swiss of Pakistani origin, a former partner of EY, who had been recruited two years earlier as an auditor and whom he persuaded at the end of 2015 to head the new international division in charge of asset management, the cornerstone of his plan to transform the bank.

From the depths of Lake Zurich, the stench of mud rises up

When the general manager officially closed his recovery plan in December 2018, CS presented its first net profits for three years. The share is still not taking off and has lost almost half of its value in the same time, but this did not prevent Thiam from being praised by Euromoney magazine, which elected him “banker of the year” in 2018.

In January 2019, a month before receiving the award in London, Thiam organised a reception in his beautiful villa in the Herrliberg district, with friends, colleagues, and neighbours.

Among them was Iqbal Khan, who, over the last few months and by virtue of his results, had become the potential dauphin to the CEO and who had recently moved into the neighbourhood.

During this evening, a simple neighbourly quarrel turns into a heated altercation between the two men. The divorce is quickly consummated and, on 1 July, Iqbal Khan resigns to join — in October — the great rival UBS as co-chair to its $2.6 trillion (2.31 trillion euro) asset management fund.

This move was unprecedented in the history of the financial centre.

The same goes for what follows, with a tail placed on Khan, ordered by Pierre-Olivier Bouée, number two at Credit Suisse, leading to a wild chase through the streets of Zurich and a confrontation between Khan and agents of a security company.

An investigation by the firm Homburger, commissioned by the bank, cleared all the other senior management, starting with Thiam. Thiam confirmed a month later that he was “unaware of this surveillance, which remains an isolated case”, before distancing himself from his former deputy.

“I’ve been here for four and a half years, and we may have had dinner together once. That’s not how I define a friend,” Thiam is quoted as saying.

However, by mid-December, one revelation after another considerably weakened Thiam’s position: from the shadowing of Peter Goerke, then director of human resources, to Colleen Graham, the group’s executive in the United States, to “visits” to Greenpeace’s computer systems, because of its campaign against funding for polluting industries, it did not look good.

“Either he is aware of the existence of a tail, which is a scandal, or he is not, which is a governance problem. In either case, he has to take responsibility,” said Oswald Grübel, the bank’s former emblematic boss, who reproached Thiam for having “tarnished the reputation of the CS, which would certainly have been better preserved if the CEO had been Swiss”

In the last few weeks, foul-smelling mud has begun to rise from the depths of Lake Zurich.

Major of Mines, foreign bodies, and ice ceilings

Victim of the worst prejudices since the beginning of his career, Tidjane Thiam has been called a “nigger” during a stormy board meeting at Prudential in 2010, after having previously denounced the “glass ceiling” that prevented him, the valedictorian at X-Mines, from working in France. In Zurich, it was an ice ceiling that he had come up against.

“The banker who wasn’t Swiss enough” is the title of Le Temps, as if to sum up the mistrust he evoked in the old German-speaking CS guard. It was as if the local establishment was just waiting for a false move to get rid of the man who has been described as a “foreign body” by the local press.

The attacks became more virulent. Randomly  he was reproached for his taste for helicopter rides and presidential suites, his “absenteeism” and weekends in London, and his “seven-figure” bonuses despite losses posted by the bank.

Yesterday, brilliant and charismatic, today he is arrogant and isolated. “He pays for never really being able to integrate the local elite, for whom he symbolises an internationalisation of CS that they don’t want to hear about,” noted Loïc Bhend. Yet two thirds of the bank’s capital belongs to foreign shareholders.

“His successor will have no choice but to continue the policy initiated in recent years,” said David Herro, vice-president of investor Harris Associates (8.4% of the capital of CS), which, along with other American, Qatari, Saudi, and Norwegian shareholders, supported Thiam against Rohner.

“It is he who must resign,” Thiam thundered on 6 February. “Who do we have to get rid of? The one who creates the problems or the one who solves them?”

A few hours later, CS’s board of directors answered his question by showing him the exit. “It is a disaster for the bank, which finds itself beheaded after the resignations of Pierre-Olivier Bouée and Iqbal Khan,” regretted Loïc Bhend. Urs Rohner will be gone “at the latest in 2021” promised a vengeful David Herro.

New chapter

For Thiam, a new chapter begins. “Unless he is directly implicated in the investigation conducted by the Swiss Market Regulation Authority (Finma), he should not be too much affected by this spying story,” his colleagues said in chorus. He now has six months before him, the time of his notice period, to see what direction to take in his professional life.

The ongoing game of musical chairs at the head of major institutions such as Barclays or HSBC could give him new opportunities, even though he declared, in early 2019, that his position at CS would be the last of its kind.

His name is still circulating at the IMF, sometimes at the AfDB. But it is still in his country, Côte d’Ivoire, that Thiam seems to be raising the most hope, just a few months before the presidential election.

Houphouet-Boigny’s grand-nephew has said several times that he was not interested in politics, but the change of course in recent weeks could usher in new ideas.

Thiam seems to have his whole future ahead of him, and the solid gold parachute he is negotiating with his former employer, estimated at between $10 to $30 million (8.88m to 26.6m euro), should provide a soft cushion for his fall.

A decimated close guard

When he arrived at Credit Suisse in 2015, Thiam brought with him a loyal following of people he had met in London, such as his right-hand man, Pierre-Olivier Bouée, whom he had met in 2002 at Aviva, brought to Prudential and then Credit Suisse.

Adam Gishen, formerly of Lehman Brothers, and James Quinn, a former Daily Telegraph journalist, also made the trip to Switzerland, the former to take charge of communications, the latter to take on the role of spin doctor, which he used to do in the City. Only the latter still seems to be in Zurich, spared for the moment by the fall of Thiam.

The Euromoney “curse”

The title of “Banker of the Year”, awarded to him in 2018 by the specialist magazine Euromoney, has not always brought luck to its holders. Viham Pandit (Citi), António Horta-Osório (Lloyds), and Francisco González (BBVA), who were awarded the title before him, all fell into disgrace, either because of strategic choices or sometimes criminal behaviour.

None of this, however, for Tidjane Thiam. “His strategy is not being questioned by shareholders, and the board has no plan B to present,” said a connoisseur of the Zürich financial centre. And yet Thiam lost the title the following year, the one that could be the high point of his career.

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