Harris Associates' Credit Suisse Investment Reduced by 50%

Credit Suisse Group AG's longtime top shareholder Harris Associates sold some of its shares, reducing its stake by about half. The troubled Swiss lender tapped new investors to raise capital.

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The US fund manager's stake in Credit Suisse fell from about 10% to 5% last year, according to a filing. David Herro, Harris's chief investment officer for international equities, said that while the investment firm did participate in Credit Suisse's 4 billion-franc capital increase late last year, its overall stake fell as existing shareholders were diluted and it sold stock.

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"We added new capital which automatically shrank our holdings," he wrote by email, adding that Harris's stake was just under 5%. "Additionally, we had to raise liquidity due to withdrawals and year-end distributions."

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Harris has owned Credit Suisse stock since the early years of this century and decided to double down on its bet after the 2008 financial crisis. While Herro defended the bank when its troubles started, he grew more critical of its board of directors as the lender struggled to fix its investment bank and move past losses and scandals. Herro's criticisms of the Credit Suisse board led to his resignation from the bank in 2018.

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Credit Suisse issued 1.35 billion new shares last year in order to raise capital for job cuts and the spinout of its investment bank. This was a more than 50% increase compared to the 2.65 billion common shares outstanding at the end of September. Some of the new shares were sold directly to new investors, diluting the holdings of existing shareholders who participated in the rights offering.

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According to Credit Suisse's website, Harris Associates holds a stake of less than 3%. Herro said the difference is due to varying reporting requirements. Another long-time shareholder, Dodge & Cox, also has a stake below 3%, according to the website.

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Herro said in an interview in August that Credit Suisse has been a problem child, and that he should have sold the stock after the first decade of ownership, when the investment was very successful.

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According to Credit Suisse's website, the Saudi National Bank is now the largest shareholder in the company, with a 9.9% stake. Qatar Holding LLC and Olayan Group, two of the company's existing shareholders, have both increased their stakes to 5% and 4.9%, respectively.