A new CEO for Credit Suisse

This is an audio transcription of the FT press briefing podcast episode: A new CEO for Credit Suisse

Jesse Smith
Hello from the Financial Times. Today, Wednesday July 27, and this is your FT News Briefing.

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Scandal-prone European lender Credit Suisse has a new chief executive. Inflation is forcing consumers to adjust and consumer goods companies are under pressure. In Argentina, people desperately exchange their pesos for dollars and find all sorts of ways to do so.

Lucinda Elliott
You send someone a WhatsApp message, they tip your apartment with the dollars or they deposit it in an offshore account.

Jesse Smith
I’m Jess Smith, replacing Marc Filipino, and here’s the news you need to start your day.

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Credit Suisse CEO Thomas Gottstein is expected to leave the bank. His departure marks the end of one of the most tumultuous periods in the bank’s history. It comes at a difficult time, but Credit Suisse has found a replacement. This is the FT’s European banking correspondent, Owen Walker.

Owen Walker
Ulrich Körner will therefore take over as CEO. He is the head of the asset management business and until a few years ago he was the head of the asset management business at rival UBS. He is therefore a Swiss national. He should probably be considered a pair of safe hands. It really was Gottstein’s calling card, if you will. This is how it was introduced. So we’ll see if it’s more or less the same.

Jesse Smith
So Owen, was Gottstein’s departure a surprise? I mean, he presided over a lot of drama at Credit Suisse.

Owen Walker
I guess if you back up a bit, it’s not really a surprise that he’s gone. The timing is very strange as they are currently looking for a new CFO. The president, he’s only been in place for a little over six months. It’s an entirely new management team and a relatively new board, plus lots of changes throughout. So for the CEO to go to this point really highlights the desperation and chaos that really exists at Credit Suisse.

Jesse Smith
So how do you think Gottstein’s tenure at Credit Suisse will be remembered?

Owen Walker
I mean, I think if you’re charitable to him, he’s a guy who was thrust into this role at a time when his predecessor went under a cloud. It happened just before the, when Switzerland went into Covid lockdowns, and then last year turned out to be an absolutely disastrous year for the bank. A succession of scandals, two in particular around Greensill and Archegos, that will really be his legacy. You know, I think it would be hard to say that he was personally responsible for either of those two things. They happened when he was the general manager. And then a whole series of historic scandals also erupted under his leadership. And that’s partly because when he came into the role, he wanted to address a lot of those things. But that meant, you know, hardly a week went by without some very negative headlines around the bank. His legacy will therefore be the CEO of probably the worst period in the history of the bank.

Jesse Smith
This is the FT’s European banking correspondent, Owen Walker.

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Retail stocks swept Wall Street yesterday after major US retailer Walmart issued its second profit warning in ten weeks. On top of that, a leading index of US consumer confidence fell for the third month in a row due to higher fuel and food prices. Meet our US editor, Andrew Edgecliffe-Johnson.

Andrew Edgecliffe-Johnson
We see a message from many consumer goods companies and retailers that stock their products that consumers, especially the most price-sensitive consumers, are starting to lower their prices. You start to see your own brand products do better than some of the higher end branded products. At the same time, wealthier consumers continue to spend. We also had very good results this week from LVMH, the luxury giant.

Jesse Smith
OKAY. So we have people at the bottom of the income scale who are forced to withdraw more, but others continue to spend. What is the general picture right now for consumer spending in the United States?

Andrew Edgecliffe-Johnson
Until this week, I would have said that economists are struggling to read the American consumer because we’ve received such mixed signals from different income brackets. I think the news from Walmart might tip the scales a little bit that we’re now seeing signs that rising inflation, rising interest rates, which are raising the costs of people’s mortgages and other loans, are now beginning to weigh on consumer demand. The only positive is that it might make the Fed’s job a little easier. If this signals that demand has helped push prices higher, this year could actually start to cool off.

Jesse Smith
Andrew Edgecliffe-Johnson is the FT’s US economics editor. Thanks Edge.

Andrew Edgecliffe-Johnson
Thank you for.

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Jesse Smith
Argentina’s currency, the peso is collapsing and Argentines are flocking to the black market to exchange their pesos for US dollars. It has to do with inflation, the economy and some political uncertainty. To learn more about what’s going on, I’m joined by Lucinda Elliott from the Fed. Hello, Lucinda.

Lucinda Elliott
Hello.

Jesse Smith
Why is there so much scramble to get rid of pesos?

Lucinda Elliott
Well, traditionally, Argentinians rush to ditch their pesos when there is a mix of economic uncertainty, high rates of inflation, growing demand for dollars and therefore rising prices on the black market. And that’s what we saw this particular race that we saw in July. Everyone who can in Argentina, from florists to lawyers, is rushing to convert their savings from pesos to more reliable and stable currencies like the US dollar or even cryptocurrencies, because they fear the economy will get worse. before. is improving.

Jesse Smith
So why do people go to the black market and not to an official bank or bureau de change?

Lucinda Elliott
The reason they go to the black market is that the central bank simply has no dollar reserves to give to customers because the country has been cut off from international markets and funding since Argentina defaulted. And that made it virtually impossible for people to get their hands on dollars the normal way. You were limited to exchanging up to the equivalent of $200 per month, and if you go to a bank for a traditional money changer, you’ll get that sum at the official exchange rate, which is currently less than twice the value of what dollars are really worth day to day. So your options are either to go in person to a cueva or a traditional grotto as they are called, which is a rather seedy and unmarked money changer that converts pesos and dollars at cheaper rates. Or what is more common in the digital age is that you send a WhatsApp message to someone who will exchange your money. They tip your apartment with the dollars or they deposit it in an offshore account.

Jesse Smith
It’s like a digital black market. But Lucinda, going back to why people are so desperate to get rid of their pesos, I mean part of that is the spiral of inflation, as you pointed out, but also earlier this month, Economy Minister Martin Guzmán abruptly resigned. Can you explain why this has been so destabilizing?

Lucinda Elliott
Martin Guzmán was seen as the president’s last close ally and a figure who gave some credibility to the current administration. And his exit essentially deprived the government of its only credible minister. And that’s when you get this kind of frenzy to sell pesos that might be worth something different tomorrow than they were worth yesterday.

Jesse Smith
What is the wider impact on the economy of all these people selling their pesos?

Lucinda Elliott
Well, when everyone starts selling or throwing away their pesos, that inevitably means there are a lot more hands floating around and trading, and that will lead to higher rates of inflation. Economists now forecast that inflation in the months of July since the departure of Finance Minister Guzmán is expected to reach a monthly rate of 7%, bringing that overall annual figure perhaps beyond 90% this year. Unless, of course, the government intervenes in some way or major reforms are announced to try to reduce rising prices. Most analysts, however, don’t see that happening in the near term, in part because Argentina is about to enter a presidential election year in 2023. This government will therefore be less willing to hit the voters where it hurts, even if it will bring down inflation. In fact, a commentator described to me this weekend over dinner that it’s like the Peronist government is driving a car without knowing the destination. They are just trying not to crash the vehicle. And more and more, it seems that the Argentines are preparing for this possible car accident, which they have unfortunately seen many times before.

Jesse Smith
This is Lucinda Eliot from the FT in Buenos Aires. Thank you, Lucinda.

Lucinda Elliott
Thank you for.

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Jesse Smith
Before we go, we would like to make a correction. Yesterday in our podcast we said that the UK has left the European Space Agency when in reality the UK remains a full member of ESA which is a non-European organisation. We regret the error and have removed it from the podcast. You can read more about all these stories on FT.com.

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This has been your daily press briefing on FT. Be sure to check back tomorrow for the latest trade news.

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