Credit Suisse Group is turning to a Swiss insider to be its fix-it chairman after Antonio Horta-Osorio was forced to resign, signaling a further shift toward caution and retrenchment and away from the risk-taking of recent years that dented its profit and reputation.
Axel Lehmann, 62, is a relative newcomer who joined the board of directors in October to oversee the risk committee after a career at Zurich Insurance Group and UBS Group, where his roles included chief operating officer. He’s replacing ex-Lloyd’s Banking Group Chief Executive Officer Horta-Osorio, who was ousted for breaking quarantine regulations.
Thrown into chaos by the twin blow-ups of Archegos Capital Management and Greensill Capital last year, Credit Suisse appointed Horta-Osorio in April to cut risk and put it on a path back to stability. Instead, his management style proved divisive and he was forced to resign over at least two instances where he broke quarantine rules in Switzerland and the U.K.
“Axel Lehmann in our view has a well-established profile in Switzerland,” JPMorgan Chase analysts Kian Abouhossein and Amit Ranjan said in a note on Monday. “He along with the CEO is likely to continue working on improving the risk culture of the group.”
On Monday, Lehmann pledged to continue with the strategy set by his predecessor, which includes focusing more on wealth management and paring back riskier activity in the investment bank.
“We have set the right course with the new strategy and will continue to embed a stronger risk culture across the firm,” he said in a statement.
The decision to replace Horta-Osorio with an established player on the local scene mirrors a move in early 2020 when the bank abruptly replaced Chief Executive Officer Tidjane Thiam after a spying scandal with Thomas Gottstein, the head of the local business and its first Swiss-born CEO in almost two decades.
Horta-Osorio had his detractors within Credit Suisse. Some executives who spoke on condition of anonymity before the ouster said the 57-year-old’s blunt approach was what the bank needed and appreciated him walking trading floors from New York to London and Paris. Others described him as divisive.
Lehmann on the other hand is praised more for his role as mediator. One executive who worked with him at UBS says he has a calming effect on more hot-headed colleagues and praised his rational and clinical approach to problems. Another executive from his time at the Swiss rival praised his network within the country, but said he faced questions over whether he had the vision needed for bigger roles.
In contrast to the relationship between Horta-Osorio and CEO Gottstein, the bank’s CEO knows Lehmann well, people familiar with their relationship said. They were heads of the Credit Suisse and UBS’s local Swiss businesses at the same time and they have a friendly working relationship.
Lehmann is “likely to see a return to a more traditional Chairman-CEO relationship,” Citigroup analysts including Andrew Coombs wrote in a note on Monday. While the overhaul plans shepherded by Horta-Osorio met with mixed reviews, “his departure leaves Credit Suisse with a lack of strong characters at the top and leadership questions will likely be raised.”
Lehmann spent almost two decades at Zurich Insurance, with one international stint as chief executive officer of the U.S. business in the mid-2000s. He also obtained an advanced management qualification at the University of Pennsylvania’s Wharton School in 2000.
No stranger to banks in crisis, Lehmann joined UBS as a board member of its Swiss unit just as it was seeking to turn a page after the Swiss state had to bail it out during the 2008 financial crisis. He worked alongside then-CEO Sergio Ermotti in shifting UBS’s strategy and curtailing risk, eventually becoming COO and then later running the Swiss business.
The challenge for the new chairman will be to show shareholders, staff, clients and regulators that he is serious about ensuring Credit Suisse has a handle on its risks while also safeguarding growth in faster-growing regions outside its home market including China.
Credit Suisse has grappled with its identity in recent years while peers took more decisive steps to rethink business models that have been challenged by regulation put in place after the financial crisis. The bank recently reversed a key plank of its 2015 overhaul under Thiam and has pledged to improve its risk management.
“Credit Suisse can ill-afford another scandal,” Citi’s Coombs wrote.
David Herro, deputy chairman of major Credit Suisse shareholder Harris Associates and a previous backer Horta-Osorio, said Monday he was “very disappointed” to learn of Horta-Osorio’s departure.
“We remain hopeful that, with the various management enhancements including the appointment of Axel Lehmann and the numerous appointments that have been made in the last 8 months to the Executive Board, along with a timely execution of this new strategic plan, that Credit Suisse will be not only strengthened but revitalized,” he said.
Arturo Bris, a finance professor at IMD Business School in Lausanne, Switzerland, said that while focusing on the “Swiss DNA” of the bank may not be popular in some circles, Credit Suisse had little choice after the news that Horta-Osorio broke quarantine.
Lehmann is “not only Swiss, he’s a risk manager and the stereotype he will be going up against is one of the uncommunicative Swiss banker who doesn’t inspire, particularly to US shareholders,” Bris said in an interview. “But I don’t think there was an alternative.”
