Credit Suisse posts quarterly loss of 2.35b francs on litigation

[ZURICH] Credit Suisse Group AG posted a fourth-quarter loss of 2.35 billion francs (S$3.33 billion) after taking a charge to settle a US investigation into the role of its mortgage securities business in the 2008 financial crisis.

The setback, resulting in the second consecutive annual loss for the Swiss bank, was bigger than the 2.07 billion-franc loss predicted on average by seven analysts surveyed by Bloomberg. The bank set aside 2.17 billion francs to top up legal provisions, including for its US$5.3 billion settlement with the US Justice Department, the Zurich-based lender said in a statement Tuesday.

Last year "was the first full year of implementing our new strategy and it was a challenging and busy 12 months," CEO Tidjane Thiam said in the statement. "Thanks to our strong client franchise and the dedication of our teams, we have made good progress on our key objectives."

After a first year devoted to downsizing the trading division, Mr Thiam, 54, is stepping up cost cuts in other areas as he prepares to sell part of the Swiss business on public markets. Midway through a three-year overhaul, he has lowered profit targets in the bank's Asia-Pacific division and in international wealth management - two units he set up to enable a shift to managing private fortunes in emerging markets.

While the settlement resolved a major source of legal uncertainty for the bank, it put a dent in its capital buffers. Credit Suisse reported a look-through common equity Tier 1 ratio, a measure of financial strength, of 11.6 per cent at the end of December, down from 12 per cent at the end of September. Credit Suisse is targeting 13 per cent by the end of 2018.

Like other big European lenders, Credit Suisse is reining in spending under pressure from low interest rates and rules requiring banks to hold more reserves. Thiam stepped up cost cuts in December for the second time since he presented his strategy in late 2015. Investment bankers in New York and London bore the brunt of some 6,000 jobs eliminated last year.

The CEO said last month that the bulk of the job cuts in the global markets division are behind it but investors may have to wait until 2018 to see the full benefits. The firm expects this year to be better for equities- and fixed-income trading, Mr Thiam said in an interview with Bloomberg Television at the World Economic Forum in Davos, Switzerland.

The stock is up 1 per cent this year, compared with a 2.6 per cent increase in the Bloomberg Europe 500 Banks and Financial Services Index. Credit Suisse is proposing an unchanged dividend of 70 centimes a share, with an option to receive stock instead.

BLOOMBERG