Credit Suisse's Muehlemann Under Pressure to Quit

By GORAN MIJUK

Of DOW JONES NEWSWIRES

ZURICH -- Pressure built on Lukas Muehlemann to resign as chief executive of Credit Suisse Group (CSR) as investors dumped shares ahead of Wednesday's publication of what is expected to be one of the bank's worst ever first-half results.

"The market expects very bad figures from Credit Suisse. This is surely a time when Muehlemann could also lose his job as CEO," said one trader who asked not to be identified. Muehlemann stepped down as chairman last month.

At 1340 shares of Credit Suisse were down 4.5%, or CHF1.50, at CHF31.95 in an overall lower market. The stock is down more than 50% from its 52-week high at CHF74.25, but up 16% from its low of CHF27.6, reached July 24.

Analysts polled by Dow Jones Newswires forecast a second-quarter net loss of CHF450 million, compared with a net profit of CHF1.3 billion in the second quarter of 2001. Switzerland's second-largest bank warned in June that it would have to publish a loss for the quarter due to its exposure to the insurance industry.

"But now with Credit Suisse's involvement in the near-collapse of Martin Ebner BZ Group, this could be the last straw for Muehlemann," the dealer added.

Credit Suisse is part of the banking consortium which offered loans to BZ Group. Swiss financier Martin Ebner was one of Credit Suisse's major shareholders and still holds a 5% stake in the bank.

Ebner two weeks ago sold his four listed investment funds to Zuercher Kantonalbank for CHF500 in order to keep BZ Group alive after it suffered massive capital losses from the prolonged downtrend on equity markets. It is surviving thanks to a moratorium with banks over repayment of its debt of about CHF10 billion.

Kurt Bucher, vice president of the Federal Banking Commission, or EBK, said BZ Group's banking activities still fulfil the country's regulatory requirement.

He declined to comment upon market rumors that Credit Suisse also faces a close scrutiny by the EBK.

"But generally, as long as such market conditions exists increased attentiveness is needed," he said.

In a research report, ZKB analyst Christoph Ritschard said analyst will be interested in news about the company's exposure to BZ as well as the weak trading figures.

The jitters at BZ Group and Credit Suisse's exposure to Ebner's finances are the latest in series of scandals that have involved Muehlemann.

He is embroiled in a police investigation about the collapse of Swissair , of which he was a long-time board member. He also sat on the board of Argentine's Banco General de Negocios, which is at the center of money laundering allegations.

Meanwhile, under his tenure, Credit Suisse faced charges of questionable Initial Public Offering practices in the U.S.

In July, Muehlemann resigned as chairman because his dual role was seen by investors as the main reason for the bank's failure to cope with the changed market environment.

The market now believes that Muehlemann may leave the bank altogether, with a number of strong contenders for his job. Credit Suisse is made up of two large divisions - the investment bank, CSFB, led by John Mack, and a strong private banking arm, led by Oswald Gruebel, who was fired by Muehlemann last year and reappointed last month.

Honorary chairman Rainer E. Gut, who was Muehlemann's predecessor, is also tipped to return in an executive capacity. He is also chairman of Nestle S.A. (Z.NES) and is seen as Switzerland's most experience manager. He was the main force behind Switzerland's successful attempt to build a new airline out of collapsed flag carrier Swissair .

"It's clear that Muehlemann can't stay. There is a widespread consensus on that," a person with close ties to the bank told Dow Jones Newswires.

"Getting rid of Muehlemann and bringing back Gut as temporary chairman and installing Gruebel as CEO would help CS get back stability and trust," he added

Both Credit Suisse and Nestle declined to comment.

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