Shareholders demand answers over UBS rescue deal

Credit Suisse Chairman Axel Lehmann on Tuesday told shareholders he was “truly sorry” for the collapse that led to the bank’s controversial takeover by UBS.

“It is a sad day for you and for us too. I can understand the bitterness, the anger and the shock of all those who are disappointed, overwhelmed and affected by the developments,” Lehmann said at the bank’s annual meeting, the first time its leaders have addressed the public since the rescue.

“I apologize that we were no longer able to stem the loss of trust that had accumulated over the years, and for disappointing you.”

A police presence was established early Tuesday at the venue, as protesters and shareholders began arriving in droves, hoping for answers and accountability following the demise of the 167-year-old Swiss institution.

A number of shareholders took to the stage over the course of the morning to lambast the bank’s leadership and demand further explanation of the process and reasoning behind the deal.

Swiss authorities brokered an emergency rescue of the stricken bank by its larger domestic rival for just 3 billion Swiss francs, over the course of a weekend in late March.

It followed a collapse in Credit Suisse’s deposits and share price amid fears of a global banking crisis, but the deal remains mired in legal and logistical challenges. Neither UBS nor Credit Suisse shareholders were allowed a vote on the deal.

“Until the end, we fought hard to find a solution, but ultimately there were only two options: deal or bankruptcy,” Lehmann, who became chairman in January 2022, told shareholders. “The merger had to go through.”

At 2 p.m. London time, Lehmann was re-elected as chairman until the completion of the merger, winning 55.67% of shareholder votes. The remaining board members were narrowly re-elected, with the exception of five that did not stand again.

In a statement Sunday, the office of the attorney general confirmed that Switzerland’s Federal Prosecutor is investigating potential breaches of Swiss federal law by government officials, regulators and top executives at Credit Suisse and UBS.

Both banks declined to comment on Monday.

‘We ran out of time’

Credit Suisse CEO Ulrich Koerner took over in 2021, when the bank was reeling from a series of high-profile scandals, risk management failures and heavy losses.

In October 2022, Credit Suisse launched a massive strategic overhaul, aimed at fixing its risk and compliance culture and addressing perennial underperformance in the investment bank.

Koerner told shareholders on Tuesday that he returned to Credit Suisse in 2021 hoping to “tackle the problems that existed and build a new Credit Suisse.”

“In short, I wanted to create an organization that our shareholders, our clients and all our employees could be proud of. Unfortunately, we didn’t succeed in the end. We ran out of time. This fills me with sorrow,” he said.

“What has happened over the past few weeks will continue to affect me personally and many others for a long time to come.”

Commentators have highlighted the importance of the deal’s success for Swiss authorities against a febrile political backdrop. The lack of input from shareholders, bondholders and Swiss taxpayers in UBS’ acquisition of its embattled rival has sparked widespread anger.

Speaking outside the annual meeting, Vincent Kaufmann, CEO of Ethos Foundation which represents pension funds comprising between 3% and 5% of Credit Suisse shareholders, told CNBC that they had “lost a lot of money” and “need to know what management is doing.”

Potential courses of action include “trying to retrieve some of the viable pay that was granted for former management, who may have failed in their duties to protect shareholders’ interests,” he said.

“We’re still looking for possibilities — it’s quite difficult with the Swiss company law to prove the damage. Mismanagement of a company is not per se something we can concretely act against former members of the management or current members of the management, but still we need to be sure that they gave the whole truth to investors and to the market, so there is still open question,” Kaufmann told CNBC’s Joumanna Bercetche.

Holders of Credit Suisse’s AT1 bond instruments, which were subject to a $17 billion wipeout as part of the UBS takeover, last week instructed a global law firm to pursue discussion and possible litigation with Swiss authorities.

“There is still a chance that the various actors will recognize and correct the mistakes made in hastily orchestrating this merger,” Thomas Werlen, managing partner at Quinn Emanuel Urquhart & Sullivan, which is representing a “diverse array” of affected bondholders in Switzerland, the U.K. and U.S., said in a release Monday.

“While we are certainly prepared to pursue whatever proceedings are necessary, a potential constructive engagement with the relevant stakeholders could prevent years of litigation. That will be an important focus for us over the coming weeks.”

Norway’s sovereign wealth fund, Norges Bank Investment Management, announced ahead of the AGM that it would vote against the re-election of Lehmann and six other board members, while Kaufmann told CNBC that Ethos Foundation will only reject members who have been sitting for more than two years.

UBS announced last week that former CEO Sergio Ermotti would return to the helm of the new bank as it undertakes the huge task of integrating its fallen compatriot into its business.

UBS will hold its own AGM on Wednesday, with further clarity expected on plans for the new integrated lender. Swiss regulator FINMA will also hold a press conference on Wednesday.

Swiss newspaper Tages-Anzeiger reported Sunday, citing one source, that plans for the new entity include a 20%-30% cut to its combined global workforce.