Mühlemann to step down as CS chairman

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

Lukas Mühlemann has bowed to pressure to give up his double mandate at the helm of Credit Suisse Group - he will step down as chairman from 2003, but stay on as CEO.

Mühlemann, who had been chairman since May 2000, has been under increasing pressure to step down after losses and problems at the investment bank Credit Suisse First Boston and at its insurance subsidiary, Winterthur.

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

Credit Suisse also reported that the head of the financial services division, Thomas Wellauer, would resign from the group in September.

But as soon as the shake-up was announced on Wednesday, financial analysts were already questioning whether it went far enough.

“The market will be relatively unmoved by this type of statement,” said Romain Burnand, a banking analyst at JP Morgan, adding that CS’s insurance business were a major drain on its bottom line.

Poor share performance

The CS announcement follows a board meeting on Tuesday to discuss the poor performance of company shares. Over the past year, the stock has lost 34 per cent of its value, opening the day’s trading on Thursday at SFr45.55 ($30.37).

In a statement, Credit Suisse said that Mühlemann would step down as chairman with effect from the company’s annual shareholders’ meeting next year.

It added that the “continuing challenging environment” demanded Mühlemann’s full attention as chief executive officer. He himself had proposed the dual mandate of chairman and CEO be separated, the statement added.

The board has appointed a committee to find a replacement candidate as chairman under the leadership of Novartis head Daniel Vassella, and directors Walter Kielholz and Marc-Henri Chaudet.

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

Damage at CSFB

However, his troubles began much earlier. Last year, he was forced to bring in new management at Credit Suisse First Boston, appointing John Mack to cut costs and try to repair the damage of legal and regulatory setbacks.

The bank also lost heavily in the aftermath of the Enron collapse and the crisis in Argentina.

Mühlemann had been criticised for not having taken his position as director of the failed Swissair Group seriously enough and for his role as director of the Argentine bank Banco General de Negocios, accused by the country’s justice authorities of having organised the flight of capital.

He had also been under fire for having paid what is now considered above the odds for the acquisition in 2000 of the United States investment bank, Donaldson, Lufkin and Jeanrette in a cash and stock deal worth SFr19.7 billion.

Grübel for Wellauer

Credit Suisse said in its statement that Oswald Grübel would replace Thomas Wellauer at the helm of the financial services division with “immediate effect”.

Grübel has held various executive positions within the CS group and was head of its private banking business from 1997.

The statement also announced that the group was expecting to record a modest net operating loss in the second quarter as a result of additional lower equity valuations in the insurance business.

Citing “further significant deterioration” of the equity markets in June, CS said this had let to substantial losses in the insurance business in spite of good technical results.

However, the statement added that the group’s banking and insurance businesses both remained adequately capitalised.

On Tuesday, the Swiss Federal Banking Commission said that it had no concerns at present regarding the Credit Suisse group, including from a capital standpoint.

swissinfo with agencies