Bloomberg

(Bloomberg) -- Credit Suisse Group AG needs to strengthen its supervisory board after Switzerland’s second-largest bank disclosed almost $1 billion of writedowns linked to illiquid positions, David Herro, chief investment officer at Harris Associates, told Finanz und Wirtschaft.

“Apparently there was a problem within the bank,” Herro, who helps manage funds in one of the Swiss lender’s largest investors, told the Swiss newspaper in the interview published on Wednesday. “That shows that there’s probably a need to strengthen the board. Within a complicated financial institute such as Credit Suisse, there’s a need for people on the board that understand the business and make sure that there are no more such blunders.”

Credit Suisse posted a bigger-than-expected loss in the fourth quarter as a result of $633 million in writedowns on mainly distressed credit and securitized pools of risky loans, which caught the top management off guard. As of March 11, it was projecting further writedowns of $346 million that, combined with a downturn in global markets that has depressed trading revenue, will probably wipe out first-quarter profit, Chief Executive Officer Tidjane Thiam said last month.

Chairman Urs Rohner told Bilanz magazine in an interview published earlier this month that he’s spoken with most of the lender’s largest shareholders and that they support its management and strategy. Credit Suisse is scheduled to hold its annual general meeting later this month.

The shares have lost about 38 percent of their value this year, with Thiam announcing a second round of restructuring measures last month to deepen cuts at the investment bank and shore up profitability. The new CEO is “taking the right measures,” using “the resources where they achieve the biggest returns over a cycle,” Herro said.

“Through this restructuring, the risks in investment banking will be diminished and the freed-up capital used to accelerate an expansion in wealth management,” he told the newspaper. “They should already have implemented this strategy two or three years ago.”

Harris Associates, based in Chicago, has held Credit Suisse shares for over a decade.

To contact the reporter on this story: Jan-Henrik Förster in Zurich at jforster20@bloomberg.net. To contact the editors responsible for this story: Simone Meier at smeier@bloomberg.net, Elisa Martinuzzi

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