Credit Suisse signals Q1 loss on Russia, legal provisions

CREDIT SUISSE Group said it expects to post a first-quarter loss due to a 200 million Swiss francs (S$287.3 million) hit to revenues from Russia's invasion of Ukraine and a previously-indicated increase in legal provisions, according to statement on Wednesday (Apr 20).

The Zurich-based lender said its results, due next week, would be negatively affected by its exposure to the war in Ukraine both with respect to counterparty and credit-risks, leading to a 200-million-franc revenue hit.

It also said it would see total legal provisions increase by 600 million francs, to a total of 700 million francs for the quarter, related to developments in a number of legal cases more than a decade old.

The negative results are yet another setback for the bank as it emerges from its worst year since the financial crisis after the twin hits from the collapse of Greensill Capital and Archegos Capital Management. The lender said in March that it is stopping pursuing new business in Russia, a step in line with global peers amid unprecedented financial sanctions.

Credit Suisse will report Q1 earnings on Apr 27.

The bank also warned of an approximate 350 million francs in losses related to a decrease in value of an 8.6 per cent stake in Allfunds Group. The loss is expected to be offset by a recovery of 170 million francs in provisions related to Archegos and 160 million francs in real estate gains.

European and US banks are warning of loss of business due to Russia's invasion of Ukraine. French lender Societe Generale is taking a hit of about 3 billion euros (S$4.4 billion) after agreeing to sell its Rosbank unit.

In March, Deutsche Bank said that it would set aside an additional 100 million euros in Q1 to prepare for a deterioration of its loan book on the back of Russia's war on Ukraine.

Citibank was forced to set aside US$1.9 billion in reserves to cover souring loans tied to both its direct Russia exposure and industries that might be impacted by the war in Ukraine. JPMorgan Chase & Co also reported a US$902 million net reserve build related to risks of high inflation, the war in Ukraine, and Russia-associated exposure.

Credit Suisse last month warned that it may need to set aside more funds for legal costs as a result of an expected Bermuda court ruling finding it liable for potentially more than US$500 million in a case involving a local insurance unit. That unit has been accused by Georgian billionaire Bidzina Ivanishvili of failing to prevent convicted fraudster Patrice Lescaudron from losing US$400 million of the US$755 million he'd invested with the unit.

The bank also warned on lower activity in its capital markets business. Swiss rival UBS Group has been laying off equity capital markets bankers because of a sharp decline in revenue after a slowdown in deal-making across the industry and investment banking revenue in Europe. BLOOMBERG