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Mühlemann resignation fails to stir markets

Mühlemann was under heavy pressure to resign one of his posts Keystone Archive

The markets have welcomed Lukas Mühlemann's decision to step down as chairman of Credit Suisse Group next year but they say more sweeping changes are needed.

Mühlemann – who will stay on as the group’s CEO – has been under increasing pressure to resign after losses and problems at the investment bank Credit Suisse First Boston and the group’s insurance subsidiary, Winterthur.

Christoph Ritschard, an analyst at Zurich Cantonal Bank, said he welcomed Mühlemann’s decision to step down as chairman. “For us, it’s a good step, and we are happy that Mühlemann will remain as CEO,” Ritschard told swissinfo.

The news barely moved the company’s share price. It has fallen by 34 per cent over the past year, and 17 per cent in the past month alone.

Not enough?

But David Hussey, a senior pan-European banks analyst at Barclays in London, said the markets were disappointed by the news.

“This is probably not enough,” Hussey said, “because the markets were expecting something to happen and this has left us a little bit unsatisfied.”

“There have been calls for Mühlemann to go and the fact that he is stepping down as chairman but remaining as CEO – plus the fact that it is not going to happen for another year – is really not the scenario that people wanted,” he added.

Hussey says the markets had been hoping for a “fresh strategic start” for the group.

“Mühlemann staying on, albeit in a slightly reduced role as just CEO, doesn’t really change things very much,” Hussey told swissinfo.

“But his wings have been clipped somewhat, and we’ll wait to see whether and how long he stays, and what power he does still have over the group.”

Finding a replacement

Ritschard says the task of finding a new chairman to fill Mühlemann’s shoes in 2003 is likely to prove a challenging one for the group.

“The new chairman needs to be a great person who can get the group back into more stable water again,” he commented.

Questions have increasingly been raised about the group strategy of pursuing both banking and insurance, while Credit Suisse results have fallen far behind those of its main rival, UBS.

Ritschard says Mühlemann – who has had to announce three profit warnings during the past four quarters – has been under “considerable pressure” to relinquish at least one of his roles at the top of the banking group.

“Recently, he has not had a very good track record,” Ritschard said.

Over the past year, Credit Suisse stock has lost 34 per cent of its value, while investors have expressed concern about mounting losses at Winterthur.

Pressure mounted on Mühlemann last month after Credit Suisse had to inject SFr1.7 billion into Winterthur to strengthen its financial base.

“With the markets in their current position,” said Hussey, “his strategy doesn’t look very clever at all.”

Wellauer also out

On Wednesday, Credit Suisse also announced the departure of Thomas Wellauer, Mühlemann’s right-hand man and head of the group’s financial services division.

Ritschard praised the appointment of Oswald Grübel, who Credit Suisse announced would take over from Wellauer with “immediate effect”.

“This could certainly have some strategic importance for the future,” he said.

Grübel has held various executive positions within the Credit Suisse Group and was head of its private banking business from 1997.

“Grübel is a very respected figure, he knows Credit Suisse very well, and he is not an ally of Mühlemann… so there will be a fresh pair of eyes overlooking the financial services division,” said Hussey.

Focus on Winterthur

Ritschard says Winterthur is putting “heavy pressure” on the Credit Suisse Group and that action must be taken to relinquish itself of the acquisition.

“The big question is: does a bank really need to own an insurance company?” he said.

“The most recent trends are certainly against this idea, and I think the focus is now much more on offering insurance products from different providers and not only in-house,” he added.

Hussey believes the changes at the top will help to remove the “thorn in the side” of the group.

“Winterthur is a big part of the financial services division and Grübel’s taking over the strategic direction of that division is a positive,” he said.

Brighter future?

Analysts say the future financial health of the group will ultimately depend not so much on the departure of its chairman but on whether there is an improvement in global market conditions.

“I am positive about the outlook for Credit Suisse, because of a lot of the negative results they have announced are connected with the very weak market environment, so only some of the mistakes come from management,” Ritschard said.


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