Credit Suisse and the Luckin Coffee crisis

luckin coffee crisis,

Let’s go to the Switzerland for a while. As many of you know, this country is famous for a lot of things, and one of the most widely recognized ones will indeed be the banking. It is home to two of the most renowned banks – Credit Suisse and UBS. The second one is currently the largest manager of the wealth in the entire world, with assets worth over $2.3 trillion under management.

UBS enters the transfer market

In November 2020 ING’s Ralph Hamers took over at UBS. His employment simply represents the recent shift that has taken place in the bank. Hamers isn’t the only addition to the company, because UBS has employed Iqbal Khan from Credit Suisse as well. Khan joined the Wealth Management team, and one of his first moves was to cut 500 positions from the total of 23,000 businesses.

Some unfriendly voices would suggest that Khan has committed some kind of treason by changing his workplace and resigning from the position of the Credit Suisse’s Head of the Wealth Management division. Bloomberg has even asked around about it, but didn’t manage to get anything controversial. In fact, David Herr, the deputy chairman of Harris Associates (the bank’s biggest shareholder), has expressed that he doesn’t have an issue with Khan’s transfer, as his actions had always been reasonable.

So we’re left with our assumptions and rumors only. The most peculiar of them says, that Khan has fallen out with his former boss, Credit Suisse’s CEO, Tidjane Thiam. The reason for that? Khan allegedly became an owner of a property set next to Thiam’s, and has (allegedly) caused some disruptions during the rebuilding process. But as we said, rumors will be rumors, and the most probable answer to the question, why Khan has decided to abandon Credit Suisse, would probably be his ambitions exceeding the company’s possibilities.

The moves of Credit Suisse

It seems that Khan didn’t want to wait too long, before he started realizing his vision in the new workplace. With Tom Naratil, his co-head, he’s doing whatever he can, to expand the contact between the biggest wealth management clients and investment bankers. This seems to be a hard task, as both sides tend to have a rather different set of priorities that usually do not mix very well. To understand the hardships of that, let’s go back to Credit Suisse for a second.

After Khan has left his position at the bank, David Miller became the Investment Banking and Capital Markets Head. Miller has already proven himself to be a different kind of banker, when compared to Iqbal, as he seems to have a completely different set of priorities and tools.

Credit Suisse is no different to most of the Investment Banking sector, as it also is considering Chinese possibilities. The opening of the Chinese market is more and more visible, as their officials have decided to track down unlawful businesses to make sure Western institutions will be lured to the trillion-dollar outlooks in the Middle Kingdom.

In April 2020 Credit Suisse has actually been granted the CSRC’s (China Securities Regulatory Commission) approval to become the majority shareholder of the securities venture, the CSFS (Credit Suisse Founder Securities Limited), being, of course, a joint project. The newly appointed Credit Suisse’s CEO, Thomas Gottstein, has teased the banks’ long-term plans in China and the goal of making a “meaningful contribution” to the Chinese market.

To promote this kind of thinking, the bank has recently launched the special Hub (Credit Suisse China Content Hub), which offers the research reports, some market insights and ideas for investment to the bank’s clients, and it specializes in the China only. Its CEO, Zhenyi Tang believes that this will help nourish the Chinese market and will bring the Western client closer to understanding the full potential of it.

The Luckin Coffee case

But these successes do not mean, that Credit Suisse doesn’t sometimes fail, which brings us to the Luckin Coffee case. Did you know, that Chinese residents really rarely drink coffee (at least on average)? But that didn’t change the fact, that Luckin Coffee, the Chinese Unicorn went from funding stage to IPO in less than 24 months, with the underwriting by Morgan Stanley and Credit Suisse.

Everything was going great until it unfolded that the company’s Chairman, Charles Lu, along with his family, have been involved in forging the books. After that, the company’s valuations dropped from $12 billion to just $1 billion, and the pandemic had nothing to do with that.

Luckin Coffee debuted on Nasdaq with $20 per share in the middle of 2019. By 2020 the price peaked at over $50, and after the shocking news surfaced, hit the bottom with $3 per share. A year later it still slowly rises, and is closer and closer to reaching the $10 margin, but it is still less than the debut price.

To read more about the case, and get to know more about Credit Suisse’s actions, visit Andy Samu’s original piece published on the Disruption Banking page:

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