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Credit Suisse tries to shake off Debit Suisse reputation

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One thing to start: Electric truck start-up Nikola said it is setting aside $125m to settle an investigation by US securities regulators and will seek reimbursement from its founder, Trevor Milton, who is facing criminal fraud charges.

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Credit Suisse chair fails to impress investors on the big day

When António Horta-Osório joined Credit Suisse in the throes of twin crises arising from Greensill and Archegos Capital Management, he promised sweeping changes as soon as possible.

The new chair’s big moment has finally arrived. Horta-Osório unveiled a broad overhaul of the troubled lender on Thursday that involves exiting its prime brokerage unit — which suffered the heaviest losses from the Archegos fallout.

The restructuring is no surprise. Credit Suisse bore more than half of the $10bn in losses suffered by a group of banks that provided prime broking services to Archegos.

It prompted many prime brokers, including the few who weren’t involved with former hedge fund manager Bill Hwang, to look at how much leverage they were extending to clients. Investors also reconsidered their use of leverage for the first time since the coronavirus rattled markets in March 2020.

Horta-Osório has also made himself known as a shot-caller since his arrival. He’s taken a direct role in decision making, placed close allies in strategic positions, and expanded the size of his own office in a move insiders have described to the FT as a power grab that has diluted the authority of chief executive Thomas Gottstein.

But the new plan hasn’t gone over so well with shareholders.

The bank’s share price fell 5 per cent following Horta-Osório’s presentation. That’s despite third-quarter results that showed a 26 per cent rise in pre-tax profits thanks to strength in its wealth management unit.

Capital from the struggling prime brokerage arm will instead be diverted to wealth management. But as Lex points out, the business of managing funds for regular wealthy customers, as opposed to the ultra-rich clients Credit Suisse typically courts, is becoming increasingly crowded. It also faces a formidable opponent in UBS.

Credit Suisse has recovered just $257m from its initial $5.4bn hit from Archegos. Meanwhile, the lender is preparing for a potential wave of lawsuits from investors who lost money from investing in the bank’s supply chain funds linked to Greensill following its collapse.

Horta-Osório, who led Lloyds Banking Group in the aftermath of the financial crisis, has written a comeback story before.

Waging a risk management revolution at Credit Suisse is one thing, but performing even greater miracles is another.

Is Silicon Valley becoming the new Wall Street?

Private equity watchers know that one two-word phrase has become their holy grail: “permanent capital”.

Now one of Silicon Valley’s most storied venture capital firms wants to borrow the well-trodden model, albeit with a twist.

Sequoia Capital, the early backer of Apple, Google and other high-profile tech companies, said last week it would create a “permanent structure” to house investor capital. Instead of putting money in funds with 10-year lifespans, investors will back an entity with theoretically no end date.

Rival venture capitalists had mixed feelings about Sequoia’s move.

On the one hand, Sequoia is effectively using its dominant position in venture capital to secure even greater flexibility from investors. The firm will charge extra fees for the privilege of housing their money in the new vehicle, dubbed the Sequoia Fund.

On the other hand, it epitomises a bigger shift in the industry towards accumulating larger and larger pools of assets, more in the vein of Blackstone than the insular venture partnerships of yore.

“One of the questions we ask companies is, ‘What’s the scale of your ambition?’ I think we have to apply that to ourselves,” Sequoia partner Roelof Botha told DD’s Miles Kruppa.

Sequoia’s restructuring will diverge from the private equity playbook in some key ways.

Investors will eventually be able to redeem from Sequoia Fund’s public stock holdings twice a year, making it more akin to a hedge fund than Athene, Apollo Global Management’s life insurance affiliate.

Still, there are signs that other venture firms are also moving towards permanent capital structures.

Take Greenoaks, the San Francisco-based firm that made big returns from an early bet on South Korea’s Coupang.

Greenoaks has raised about $1bn this year for a Berkshire Hathaway-style holding company in Guernsey that invests in large private internet companies. It plans to take the company public in the next few years, allowing investors to trade in and out of its shares.

If the efforts prove successful, expect plenty of Silicon Valley peers to imitate them, given they’re a bunch not usually known for passing on the latest fad.

Carlyle/Metro Bank: friends reunited?

Dan Frumkin and Carlyle go back a long way.

Starting a decade ago, Frumkin was part of a turnround effort at Bermuda-headquartered bank Butterfield, which Carlyle owned between 2010 and 2016 in a deal it now trumpets as a case study of its success.

Now they might be reunited.

These days Frumkin is chief executive of UK-based Metro Bank, where he’s attempting another turnround.

The lender’s share price has fallen an incredible 97 per cent from its March 2018 peak, cutting its market capitalisation from £3.5bn to under £200m. That’s partly because of a damaging loan misreporting scandal in 2019 that forced out its chair Vernon Hill and chief executive Craig Donaldson, after which Frumkin took the helm.

The lender said on Thursday that Carlyle had approached it about a possible takeover.

Frumkin has been interested in a take-private ever since he took charge of the British lender, believing his planned overhaul would be easier to execute outside of the pressures of the public market.

The rationale for Carlyle is less clear at this stage — beyond backing their man and, potentially, buying into a business that is cheap and well-placed to benefit from interest rate rises.

Carlyle has a few weeks to weigh up that case. Under the UK’s takeover rules, it must announce a firm intention to bid by December 2, or walk away.

Job moves

  • Société Générale’s head of finance and deputy general manager William Kadouch-Chassaing has joined Eurazeo as its finance chief, succeeding Philippe Audouin when he steps down from the investment group’s board in March.

  • Blackstone has appointed Stephanie Lundquist, former president of food and beverage at Target, as a senior adviser.

  • Crypto mining outfit Bitfury has named former Binance US boss Brian Brooks as chief executive, replacing Valery Vavilov, who will become the company’s “chief vision officer”.

  • Clayton, Dubilier & Rice has appointed Jillian Griffiths, previously the firm’s chief operating officer, as chief financial officer.

  • Clifford Chance has named Sonia Gilbert as the new London leader of its tax, pensions, employment, and incentives practice for a four-year term.

Smart reads

Follow the money Ron Perelman, once America’s richest businessman, made a name for himself as a philanthropist too. But mysterious loans by his family foundation and questionable ties between charitable funds and his businesses are under scrutiny as he unwinds his empire. (Bloomberg)

Culture wars In the weeks following the notorious slide deck that chronicled young bankers’ gruelling work conditions, a wave of widely publicised salary increases washed over Wall Street. Behind the scenes, their superiors were hardly sympathetic. (New York Magazine)

There’s always a loophole Banks are using “carbon intensity” to measure their action against climate change — a metric critics have accused of being a workaround that allows them to continue investing in dirty fuels. (The Guardian)

News round-up

UBS boss Hamers takes axe to hierarchy by ending bank’s top rank (Reuters)

Rivian IPO puts a spin on Ford’s market value (FT)

In a deal desert, Warren Buffett’s Berkshire Hathaway keeps buying itself (WSJ)

Commerzbank to eke out annual profit despite restructuring costs (FT + Lex)

BTS’s music label partners with crypto exchange on K-pop non-fungibles (FT)

RTL to beef up German platform in bid to counter streaming giants (FT)

Google strikes $1bn ‘cloud’ deal with exchange operator CME Group (FT)

Bed Bath & Beyond: day traders seek new meme themes (Lex)

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